While the operational momentum is clearly solid, investors should pay closer attention to the risks. History shows Palantir stock can fall hard as sentiment shifts.

Investors are beginning to see Palantir as more than a niche government contractor. Palantir achieved its first $1 billion quarter in the second quarter. Investors should be wary of Palantir's extremely high valuation.

Palantir is riding twin engines of growth with its commercial and government contracts. Will it be enough to sustain its valuation?