Palantir Technologies (PLTR) has been one of the hottest stocks of 2025.
The company’s shares have surged more than 400% over the past year on the back of AI enthusiasm and government contract wins. But a sharp pullback this week has highlighted growing doubts about whether the rally has run too far.
Short seller Citron Research drew headlines after publishing a report arguing that Palantir’s valuation is “irrational” when compared with OpenAI. The AI lab recently raised $6 billion at a $500 billion valuation, giving it an extreme—but arguably justified—17 times sales multiple. Citron contends that if Palantir were valued at the same lofty multiple, its stock would be worth only around $40 per share, a fraction of its current $160-plus trading level.
Palantir, expected to generate just $5.6 billion in revenue by 2026, lacks the subscription-based scalability of OpenAI’s model. Instead, it depends on slower, bespoke government and enterprise contracts, leaving fewer network effects and less margin expansion potential.
Market Rotation Weighs on High-Flyers
The Citron report landed at a moment when Wall Street was already shifting away from crowded AI trades. On Tuesday, the Nasdaq fell 1%, and while most stocks rose, the few that didn’t were among the heaviest hitters. Palantir slid 6.9% to $163.58, marking its fifth straight day of declines and a 12% drop from its record high of $190 just one week earlier.
Other major tech names also stumbled. Advanced Micro Devices lost nearly 4%, while Nvidia shed 2%. Even Tesla, often buoyed by AI optimism, edged down 0.3%. The broader S&P 500 slipped just 0.4%, underscoring how weakness in a handful of AI-driven names dragged the indexes lower.
The Citron report landed at a moment when Wall Street was already shifting away from crowded AI trades. On Tuesday, the Nasdaq fell 1%, and while most stocks rose, the few that didn’t were among the heaviest hitters. Palantir slid 6.9% to $163.58, marking its fifth straight day of declines and a 12% drop from its record high of $190 just one week earlier.
Other major tech names also stumbled. Advanced Micro Devices lost nearly 4%, while Nvidia shed 2%. Even Tesla, often buoyed by AI optimism, edged down 0.3%. The broader S&P 500 slipped just 0.4%, underscoring how weakness in a handful of AI-driven names dragged the indexes lower.
Insider Selling, Analyst Skepticism Add Pressure
Citron also raised eyebrows about insider behavior. While Elon Musk was famously buying Tesla shares during its rise, Palantir CEO Alex Karp has sold nearly $2 billion worth of stock. That selling has fueled doubts about management’s conviction in sustaining the rally.
Wall Street analysts remain divided. Of 29 tracked by FactSet, just seven rate Palantir a buy, while most call it a hold. Price targets range from $45 to $210, reflecting deep uncertainty over how to value a company trading at more than 200 times forward earnings—compared with an S&P 500 average of about 22 times.
Citron also raised eyebrows about insider behavior. While Elon Musk was famously buying Tesla shares during its rise, Palantir CEO Alex Karp has sold nearly $2 billion worth of stock. That selling has fueled doubts about management’s conviction in sustaining the rally.
Wall Street analysts remain divided. Of 29 tracked by FactSet, just seven rate Palantir a buy, while most call it a hold. Price targets range from $45 to $210, reflecting deep uncertainty over how to value a company trading at more than 200 times forward earnings—compared with an S&P 500 average of about 22 times.
AI Darling or Overhyped Risk?
Palantir has delivered stunning returns, climbing more than 100% this year and 400% over the past 12 months. But with shares trading at a sales multiple nearly 7.5 times higher than OpenAI’s and far above traditional software peers, expectations may have outpaced reality.
The AI revolution is real, but Palantir’s latest slide suggests investors are beginning to question whether it deserves to sit at the top of that wave—or whether hype, rather than fundamentals, has been driving the stock.
Considering a $1,000 investment in these companies?
Our team at Stock Investor carefully curated a list of top stocks with the potential for significant returns, suitable for beginners and seasoned investors alike who are eager to learn a trade and unearth the best stocks to buy. Though not featured in this article, these selected stocks could be game-changers in the future.For those seeking dynamic trading experiences, consider joining our Swing Trade Alerts, Option Income Alert, or our Trading Room. Take advantage of our special offer today, starting at just $1 in the first month.
Unlock the secrets of Smart Money
Explore how billionaires and institutions are influencing the market. Follow their every move with DarkOption Flow and stay updated on essential market insights. Begin your journey to informed investing today!
Education
And if you're a fan of Invest opedia, you'll appreciate what we offer at SharperTrades even more. Explore our comprehensive option trading course and technical trading course, where you can learn trading, analyze stocks, delve into chart patterns for stocks, and gain invaluable insights for making the best company investments.
Unlock Your Stock Market Edge with SharperTrades. Dive into powerful trading tools, learn a trade, and receive expert guidance. Stay up-to-date with regular market updates. Learn trading, basics of investing, and how to pick the best stocks to buy. Whether you're a beginner or seasoned investor and trader, we've got you covered. Get started for free, today!
Comments
Post a Comment