You realize that this is not mutually exclusive with what I just wrote?
Palantir builds software for military and security purposes. But the customers don't give this data to Palantir, custody of this data remains with the customer.
It's not like tech companies deserve the benefit of the doubt when it comes to trust anymore, if they ever did
How is that possible if Palantir software runs on machines Palantir controls?
am close with a few employees there
People seem to struggle with the concept of private datacenters these days. Palantir customers tend to be the sorts of orgs that are pretty paranoid about their data, and they wouldn't be handing it over to some schmucks without being confident that those concerns were addressed. Militaries and governments generally aren't fuckin around with things like intelligence data, so I think it's reasonable that Palantir is able to make a convincing case to the world's most paranoid orgs that their data isn't being sent anywhere (and it'd likely be air gapped anyway).
Just because everything you touch is in the cloud doesn't mean other orgs aren't still building their own datacenters and then buying software to run inside.