Palantir, the software company, has essentially come full circle over the past year. The stock now trades within roughly a tenth of a percent of where it sat at exactly this time last year. That headline number, however, hides the real story: the stock is about 20% off the lows it printed just a few sessions ago, and it is roughly 35% to 40% off the highs it reached in October and November of last year.
A Volatile Round Trip
The price action here is extreme. Even after three consecutive years of triple-digit gains, Palantir is down about 26% year to date. It is, in short, an intensely volatile name — but it was having a strong session on the day in question, trading up nearly 4.5% higher.
The longer-term chart tells a story of parabolic growth. Over the prior five years the stock climbed from below $7 to $100 and onward to $230. That was an extraordinarily rapid ascent, and it pushed the forward P/E multiple above 200 — an enormous valuation to justify for any company. The compression that followed was the natural consequence. As of the discussion, the stock sat in the $130s (specifically quoted around $131.48), having traded as low as below $120 very recently.
The DA Davidson Upgrade
The immediate catalyst for the day's move was an upgrade from DA Davidson, which raised its rating to buy from a prior neutral. The firm set a new price target of $175, up from $165 — both figures well above the current trading level.
The core of DA Davidson's argument is that the company has "grown into its valuation." Profits are up significantly while the stock's multiple has come in, and the analyst framed the resulting entry point as a "gift" arriving just in time for the United States' 250th birthday. The firm argues Palantir holds several competitive advantages over other software companies, advantages that are becoming more pronounced because of AI.
The AI Orchestration Thesis
The heart of the bullish case is somewhat complex but centers on the idea of Palantir as an orchestration layer for AI models. The key development is that the company can now swap the AI model underneath its solution. This directly neutralizes what had been perceived as the single biggest threat to Palantir's business model — the fear that enterprise customers could simply go directly to Anthropic or OpenAI to solve their own problems.
The DA Davidson analyst argues Palantir is now a better option for enterprises than either OpenAI or Anthropic. He illustrates this with a cautionary scenario: Anthropic's recent decision to take a confrontational stance toward the US government resulted in the government placing restrictions on AI models, and in Anthropic pulling its own model from the market. Any enterprise that had built its business directly on top of that model could have suffered a catastrophic disruption.
By contrast, a company that built its business on an orchestration tool — which is exactly what Palantir provides — would experience only a minor transition, because Palantir simply goes in and swaps out the underlying AI model. The analyst extends this into a growth argument: this swap-ability should allow Palantir to take business away from both OpenAI and Anthropic, because customers are not singularly exposed to any one model or the threats specific to it.
Recent Headlines and Sentiment
Palantir has been in the news constantly. The day before, the stock jumped roughly 8% after announcing a strategic partnership with Nvidia focused on deploying AI models for US governments and critical infrastructure. Alongside that, the company disclosed a set of additional positives: an expanded commercial agreement with Surf Air Mobility and a new contract to provide the US Army with its Foundry platform.
Investor sentiment also got a boost from a disclosure that the president owns at least a million dollars — and at least a million shares were referenced — in Palantir stock. While the company's fundamentals are described as strong, its chart remains messy. The stock got caught up in what has been called the "SaaS apocalypse," though the view expressed by Dan Ives is that this is not a functional narrative and that Palantir does not belong in that grouping at all. Overwhelmingly, recent sentiment has been bullish: the last five analyst actions have all been either buy reiterations or upgrades.
The Political Dimension
There is an unavoidable political element to the story. CEO Alex Karp delivered what amounted to a lightning-rod interview, one carrying a distinct right-versus-left narrative, with the CEO appearing to plant his flag firmly on one side. Whether that is a foolproof strategy is questionable — taking a side is not obviously a way to win on both sides of the political spectrum. That said, Karp was clearly talking his book, deliberately pitting himself against Anthropic during the interview. The message appears to resonate with many companies: the pitch is that they can still own their own data, whether they choose to go with Anthropic or choose to go with Palantir.
The company genuinely appears to have foundational software that plays an important role in the broader AI trade. But the risks are real and stack up on multiple fronts: political risk, general AI risk, and the simple fact that this is a high-flying name with a lot of momentum embedded in its price.
An Options Strategy for a High-Flyer
Given the strong fundamentals paired with a genuinely messy chart and elevated volatility, the preferred way to gain exposure while safeguarding capital is to risk less money up front through a risk reversal. The specific structure is to sell a put spread to finance the purchase of a call spread.
The trade, using January expiration, works as follows: sell the 120/100 put spread and use the proceeds to buy the 150/200 call spread. As of that morning, the entire position could be entered for roughly $1.70, or about $1,700 for one contract's worth of exposure.
The appeal is capital efficiency. Buying 100 shares of the stock outright would cost roughly $120,000. This structured trade gets you in for about $1,700 — dramatically cheaper. The maximum loss on the position is around $18,000, versus the full $120,000 at risk in an outright share purchase. In exchange, the trader retains upside participation if the stock climbs above $150 before January expiration.
The through-line is a fascinating tension: a company with a compelling and foundational AI narrative, strong fundamentals, and a wave of analyst upgrades, but one whose stock has completed a full round trip over the year and remains extremely volatile — making disciplined, defined-risk exposure a sensible way to participate.
