3 reasons why Warren Buffett is steering clear of Palantir Stock

Palantir Technologies (NASDAQ: PLTR) has become one of the hottest mega-cap stocks of 2025, with its shares surging more than 70% year to date. No other company with a market capitalisation north of $200 billion has come close to matching that gain.

However, one of the most influential investors of all time, Warren Buffett, is keeping his distance. And according to market watchers, the billionaire’s reluctance isn’t likely to change any time soon. Here are three key reasons why Buffett wouldn’t go near Palantir stock, not even with a 10-foot pole.

Palantir is outside Buffett’s circle of competence

Buffett has always emphasised the importance of investing in businesses he thoroughly understands. At Berkshire Hathaway’s most recent shareholder meeting, he stated he would be open to putting $100 billion into a company, if it met a few core criteria. Top of the list: a business model he can grasp.

Palantir’s AI-powered software platform, which serves both government and commercial clients, likely falls far outside Buffett’s comfort zone. Though Berkshire Hathaway has invested in software companies like Snowflake in the past, those moves were reportedly made by Buffett’s deputies Todd Combs and Ted Weschler, not Buffett himself. Buffett has openly admitted that he doesn’t fully understand AI and that alone may be enough to rule out Palantir.

Unpredictable earnings growth is a red flag

Even if Buffett were willing to look past Palantir’s AI-heavy business model, its earnings trajectory presents another obstacle. In a 2014 shareholder letter, Buffett wrote that estimating future earnings is the very first step in evaluating any investment. If those earnings can’t be predicted with a reasonable degree of certainty, he simply moves on.

Palantir’s reliance on government contracts, especially from the U.S. Department of Defense and intelligence community makes its revenue stream highly susceptible to political shifts. The volatile nature of federal funding would likely make it impossible for Buffett to forecast Palantir’s earnings five years down the line with the confidence he demands.

Buffett would balk at Palantir’s sky-high valuation

Known for his value investing roots, Buffett still pays close attention to how much a company is worth relative to its earnings. Palantir’s valuation would likely raise serious concerns. Currently trading at around 104 times trailing 12-month sales and 238 times forward earnings, Palantir’s stock is priced for perfection. While the company is posting impressive revenue growth, 39% year over year in Q1 2025. its guidance already suggests a deceleration to around 36% for the full year. Wall Street analysts predict even slower growth in 2026. To Buffett, these figures likely scream overvaluation. Without a clear path to sustained, outsized earnings growth, such lofty multiples could be tough to justify.