Thiel has made no secret of his intent to use technology to dispense with that pesky democracy problem that billionaires have, and Palantir is pretty obviously his attempt to do just that. It's a reductio-ad-absurdum argument against listening to your citizens:
You put it in the hands of a populist demagogue, the power to apply hyper-targeted pain to their enemies amplifies their darker tendencies, and when evil happens you say: "look, the people can't be trusted." Meanwhile, you use it to direct the pointy end of the state's stick towards people you don't like (because the demagogue is too lazy to actually use those hyper-targeting features themself) so you can interfere with democratic attempts to limit your power without bothering to pay for the pepper spray.
Nobody in their right mind would want their government anywhere near it.