Palantir faces investor exodus and German military rejection as narrative cracks

Palantir is facing simultaneous pressure from retail investors and geopolitical rejection. Retail traders dumped $82 million in Palantir shares in the week through May 13, rotating out of AI software into semiconductor and memory stocks. Meanwhile, Germany's Bundeswehr formally excluded Palantir from its defence cloud procurement, citing sovereignty concerns over allowing a US company access to national military data. Three European alternatives — Almato, Orcrist, and ChapsVision — are being evaluated instead. Despite strong Q1 results ($1.63B revenue, up 85% YoY), Palantir's stock is down ~20% year to date, with critics calling its 42x forward sales valuation absurd. CEO Alex Karp pushed back, comparing Germany's stance to 'conversations about witchcraft' and pointing to Palantir's battlefield use in Ukraine as proof of value. The article argues Palantir's core problem in 2026 is no longer execution but persuasion — its financial story is strong, but its broader narrative is cracking.