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Someone is betting on Palantir, contrary to Berry's prediction of long-term collapse. Welcome to Signal versus Noise , where we analyze unusual options activity and ask the question: "What is the market trying to say with this movement?" Today we have Palantir, which had a rather difficult and controversial 2026 .
The year opened with the stock price closer to 180. The price has now dropped back to 165.93, but that was after falling below 110 in late June. On the one hand, Michael Berry claims that Palantir is in an “AI bubble” and the market cap will fall below 100 billion. On the other hand, someone is buying long-term call options today for $13.58 million, which require the stock to reach new all-time highs to yield.
Obviously, these two points of view cannot be correct at the same time. Currently, at the time of writing, Palantir is trading at 165.98. The market capitalization is about 400 billion dollars. So, Berry's estimate predicts a share price drop to $42, given about 2.4 billion shares outstanding. This would represent a drop of approximately 75% from the current share price.
But we have an options buyer looking in the other direction. Let's take a look at these strikes. The main deal was a call option for 190 with a term until December 17, 2027. 15 months until expiration. 3150 contracts. The premium paid was $12.76 million, the breakeven point was $230.60. Approximate odds of profit—1 in 3.
It is important to pay attention to the breakeven point, as Palantir's historical high is $207.52. A buyer needs a little more than just a new all-time high, right? A new record and another 11% above it are needed to break even on these options. There is an even smaller call option for 250 with an expiration in 498 days, or 16 months.
300 contracts have been opened . That's about $819,000 in premium. The break-even point here is $277.30. The odds of this deal being profitable are one in six. This is obviously a more ambitious growth bet. The 190 call option is the basic contract. But the way this operation is performed says a lot .
The 190 strike was executed in six parts, exactly 40.60 each, through a series of quick deals and blocks. This looks like one large institutional buyer selling a large volume, rather than a random coincidence for a group of different traders. So, the open interest behind this strike for this event was 1527 contracts and the trading volume was over 4100.
So, this is not a small trader at all. Probably an institutional buyer. This is definitely a realistic long-term bet , made at the very moment when someone like Michael Burry publicly announced his prediction of a 75% crash. So why do you want to overpay at all? Why do you want to be the opposing side in the Burry stake?
Palantir has had a terrific last few years, especially considering what happened during the last quarter. Last quarter, its revenue grew by 93%. Commercial revenue here in the US has increased by 149%. Net retention of dollar revenue was 157%. Adjusted free cash flow margin was 63%. That's why people are now paying a premium multiplier.
Palantir is actually one of the few AI companies in the software space where the story of growth and marginality is simultaneously in the same direction, and it is the right direction. We also see that the company just raised its full-year forecast to 8.154 billion. Alex Karp talked about how the demand for AI sovereignty has been unleashed, and we have stocks that are up 51% from their August lows.
They grew by 9% thanks to the agreement with PWC ( PricewaterhouseCoopers). So you understand why the " bullish" forecast has some basis. As for estimates—no one really knows how much it costs. The average target price on the Street is 193.88, which is of course below the breakeven point of 230.60 on the large call option.
But the targets range from $80 to $255, so there's a big spread here. And the historical high, again, is 207.52, so for a large call option you need 230.60 , and for a smaller one, 277.30. This is a very specific type of " bullish" trading. Much more than just the fact that Palantir is a good name and deserves such accolades.
The point is that Palantir is such a good company that the market needs to take it beyond its recent record, above the average market forecast, to the upper end of this price range. And listen, for the smaller call option you need 277.30. This is above the upper limit of the market forecast at the moment.
So for me, that's a pretty high bar. The good news is that the buyer gave himself plenty of time. If this were a call option that Palantir would make another 50% surge in the next few weeks, like 15 or 35 days before expiration, it would all look like lottery tickets. But with 15 or 16 months to go, there's plenty of time, a few more quarters, and even more earnings to somehow justify these estimates.
And that's what makes this kind of jump interesting, isn't it? The buyer avoids short-term noise. Whether it's the CPI report, the Fed meeting, or the latest twists in the Iran war—they're not really trying to guess what's going to happen in a week or two. This is a bet that the company will realize its potential over a longer period of time.
But this is precisely where Bury's argument lies. If you read between the lines, he's not saying that Palantir doesn't have any growth. He already says the price is too high. She has over- capitalized on this future growth in the current share price. Too far and too fast, so to speak. And you know, if the market starts treating AI software multiples the same way it treats regular software now, you could run into a problem: even with good performance, stocks could find themselves in a difficult valuation cycle as multiples get squeezed.
So, that's what the struggle is all about. I'm curious what you consider to be the signal and what is the noise in this deal? I think it's a matter of timing. I think it's the duration. This is the signal. The noise is what we hear from another big “ bear” in the market, who calls the company an “AI bubble.” We've had plenty of people like this before, and they've been right or wrong in various cases, but a 75% drop?
Write your thoughts in the comments below. This was another episode of the program "Signal vs. Noise." Like and subscribe for new videos. Thank you for watching tastytrade.
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