Palantir Stock Hits ATH, But Can the Rally Hold Without Volume?

Key Points

• Palantir stock hits new ATH after geopolitical tensions boost defense-related demand.
• AIP platform continues to drive enterprise adoption and million-dollar deals.
• Caution warranted as rally lacks volume and options market signals limited upside.

Palantir Technologies Inc. NASDAQ: PLTR made a new all-time high (ATH) after a surge of more than 5% after the United States engaged in missile strikes against targets in Iran. The stock is up more than 48% in the last three months after a sell-off to start the year.

A key catalyst for the stock’s growth has been the belief in the long-term demand for Palantir’s AI software platform, AIP. The company has also been showing growth in both the government and commercial sides of its business.

That growth stems in large part from the company’s AIP boot camps, which are what they sound like: free trials of the company’s enterprise software that are resulting in a significant number of new customers. In its most recent quarter, the company announced 139 deals worth at least $1 million and, in some cases, as high as $10 million.

This is showing up in bullish fundamentals, including:

• Strong cash flow

• No debt

• 124% net dollar retention shows that it is adding and keeping customers on both sides of its business.

However, with PLTR stock nearing its ATH, valuation concerns are coming to the forefront. There’s no way to spin the company’s strong fundamentals as a justification for its current stock price. Investors usually pay a premium for technology stocks. They might need to look back at Amazon.com Inc. NASDAQ: AMZN to find a company that grew into a massive valuation. Palantir bulls might argue that AIP is to Palantir what AWS has been to Amazon.

Time will tell. In the short term, investors continue to be willing to pay a premium for the stock. But does this recent move suggest a longer-term move higher for Palantir?

The Bull Case for PLTR Stock Is on Display

Prior to the U.S. actions in the Middle East, the next catalyst for Palantir was expected to come from its earnings in August. Now that investors can’t ignore Palantir’s role in defending the United States and its allies, it’s worth remembering that the new age of warfare is at the core of Palantir’s bull case.

The wars of the future are going to be fought much differently than anything investors have known. Advancements in technology are on display in risk assessments, and the ability for countries to guide missiles that strike targets with precision.

That means software will play as strong a role as hardware. Investors should consider Palantir stock as a hedge against geopolitical uncertainty because of this.

Geopolitical conflicts have always supported the base case for owning Palantir stock. Whether you like the company or not (and many investors are vocal about their dislike of Palantir), it’s ingrained in the fabric of the U.S. government and particularly the Department of Defense (DoD). In fact, despite strong gains on the commercial side of its business, Palantir still generates 55% of its total revenue from government contracts.

The Current Rally Lacks Conviction

Palantir stock is volatile, so a move of over 5% as the stock has done, is not unusual. However, unlike past bullish moves, this move is not being supported by a significant uptick in volume. In fact, PLTR shares have traded below the average volume of around 81 million shares in the last two trading sessions.

The takeaway is that investors should be cautious about the sustainability of this move. Therefore, long-term investors may want to wait for confirmation of an upward move supported by more volume. The stock will likely pull back to retest support, which could make for a better entry point.

The July 3 options chain supports this caution. Rising call volume and open interest at the $140 and $145 strikes suggest short-term bullish sentiment. However, this enthusiasm is not matched by rising implied volatility (IV), which is drifting lower across key strikes. This signals that traders aren’t expecting a strong price move in either direction.

For long-term investors, this mismatch between price action and conviction suggests caution. But for traders, the setup may offer short-term upside, especially if volume begins to rise and IV reverses course.