Palantir is experiencing a departure of investors and a rejection from the German military as its narrative begins to unravel.

      Palantir is facing challenges on two fronts: retail investors sold $82 million in shares during the week ending on May 13 as they shifted their focus from AI software to semiconductor and memory stocks. Additionally, Germany’s military has officially excluded the company from its defense cloud procurement. Palantir reported Q1 revenue of $1.63 billion, an increase of 85% year-over-year, but its stock has dropped around 20% so far this year. CEO Alex Karp criticized Germany’s position in a Bild interview, likening the debate to “witchcraft discussions” and asserting that Palantir's technology has been validated in Ukraine. The Bundeswehr is currently evaluating three European alternatives: Almato, Orcrist, and ChapsVision.

      Over the past two weeks, Karp has been vocal about Palantir Technologies' essential role. However, both retail investors and the German military seem to disagree, with their actions aligning closely in timing. According to JPMorgan data reported by analyst Arun Jain, individual investors were net sellers of $82 million in Palantir shares during the week ending May 13, also selling $117 million in Microsoft shares. This shift is not a complete departure from technology, but rather a movement from software to semiconductor stocks. The VanEck Semiconductor ETF and iShares Semiconductor ETF have seen increases of 60% and 75% year to date, respectively. The Roundhill Memory ETF, launched on April 2, has approximately doubled its value and attracted over $5 billion in assets, including $1.1 billion in a single day last week. Currently, memory chips, rather than enterprise AI software, are the most popular choice among retail investors.

      Despite impressive first-quarter results—$1.63 billion in revenue, up 85% year over year, with U.S. revenue rising 104% and U.S. commercial revenue increasing 133%—Palantir's stock has dropped about 20% since the start of the year. The company raised its full-year guidance to $7.65 billion, anticipating 71% annual growth. Nevertheless, the stock price declined post-earnings, as the market has deemed that Palantir's remarkable growth does not justify a valuation of about 42 times estimated 2026 sales. Investor Michael Burry, known for his role in The Big Short, has taken a bearish stance, while short seller Andrew Left has labeled the valuation as “absurd.”

      Germany’s military stance represents an additional challenge. In a recent Bild interview, Karp expressed his surprise at Germany’s decision to exclude Palantir from military contracts, a position that has solidified over the past month into an official policy. Vice Admiral Thomas Daum, who oversees the Bundeswehr’s Cyber and Information Domain Service, remarked that Palantir “is not being considered at all right now” because the military is not willing to permit employees from a private American company access to national data. German Digital Minister Karsten Wildberger indicated to Politico that Berlin is seeking a European alternative.

      The Bundeswehr has narrowed its options to three candidates: Almato in Stuttgart, Orcrist in Berlin, and ChapsVision in Paris. ChapsVision has already been selected by Germany’s domestic intelligence service, the BfV. The evaluation of military candidates is anticipated this summer, with a contract decision expected by year’s end, shaping the digital framework of Germany’s armed forces for the foreseeable future. Palantir has been expressly excluded from this process.

      Karp reacted to this exclusion with characteristic candor, comparing the German discourse surrounding his company to “witchcraft discussions” and contending that Palantir’s technology is utilized “on every serious battlefield in the world.” He emphasized that co-founder Peter Thiel was born in Germany and mentioned that he himself studied there and speaks fluent German. “Peter and I are the leading Germanic and/or German-speaking businessmen globally, and every other country would have found a way to embrace us,” he stated. “If we were French, the French would collectively compel us to obtain French passports, communicate only in French, and change our name to Falantir.”

      Karp’s remarks followed a meeting in Kyiv with Ukrainian President Volodymyr Zelenskiy and Digital Minister Mykhailo Fedorov. He described Palantir’s offerings as “an operating system for war” and argued that Ukraine has validated their effectiveness more convincingly than any sales pitch could. Karp highlighted that the Ukrainian military manages the battlefield “the way a technology company manages its customers,” meticulously tracking outcomes by square kilometer.

      The underlying message to Berlin was clear: invest in what has been battle-tested, rather than in what has been showcased in PowerPoint presentations. Karp posed the question: “What products is Europe going to buy to defend itself? Products tested in PowerPoint? Or products that independently halted a major military power?”

      Germany’s response hinges on sovereignty. The Bundes