Cathie Wood’s $9.1M Palantir Sell-Off Has Everyone Talking… But the Real Danger Lies Elsewhere

Cathie Wood just dumped $9.1 million worth of Palantir stock from her ARK Innovation ETF. If this feels like a duplicated article, it’s because she also sold $16.9 million worth of the same stock earlier this month. So, is this a calculated move to lock in gains (for once) or a signal that Palantir’s helium rise might have hit its ceiling (even for someone with her trademark rose-colored glasses)?

Palantir’s stock had an absolutely wild 2024, skyrocketing 340% to become one of the Nasdaq’s biggest winners. Gassed up by its AI-powered data analytics platform and high-profile government contracts, Palantir has positioned itself as the go-to player in the big data game. But at its current valuation, it’s trading at 340 times trailing earnings and a forward price-to-earnings ratio of 137. For context, Nvidia (the AI daddy of them all with arguably more growth potential) trades at a P/E of 52 (and a lot of pundits online are making the argument it’s way overvalued).

Even the price-to-sales ratio is at nearly 60. Analysts like Jefferies’ Brent Thill have gone so far as to downgrade the stock to “underperform,” smacking it with a price target of $28 per share. If you suck at math, that’s a 59% downside from current levels. Not everyone is bearish, though. Wedbush’s Dan Ives remains bullish, dubbing Palantir the “next Oracle.” He sees massive growth potential in Palantir’s AI platform, which integrates AI into workflows and automates tasks. This has driven significant traction in the U.S. commercial sector, where revenue grew 54% year-over-year in Q3 2024.

Even with its premium valuation, bulls argue that Palantir’s moat in the AI space (driven by its dominance in government and commercial sectors) justifies the price tag. The company’s total revenue surged 30% in Q3 to $726 million, with U.S. government revenue growing 40% year-over-year. It’s clear there’s still room for expansion, especially in commercial markets where Palantir has only scratched the surface with 321 clients. If the valuation wasn’t enough to make you pause, just look at the insider selling. Palantir’s CEO Alex Karp has offloaded around $1.9 billion worth of shares in the past three months, including $1 billion in just the last two weeks. While this is part of a pre-planned trading strategy, it doesn’t exactly scream confidence.

Even retail investors (the lifeblood of Palantir’s crazy fanbase on reddit) have been heading for the exits. After Palantir’s inclusion in the S&P 500, retail ownership dropped 7 percentage points, while institutional ownership ticked up. Less volatility might appeal to pension funds, but it’s hardly what excites day traders. Palantir’s stock is undoubtedly the new hot girl at school, but at these levels, it’s like paying for Trump’s meme coin… flashy, exciting, but you’re going to get rug pulled. While the company’s growth story remains compelling, the valuation leaves little room for error.

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Stock.News does not have positions in companies mentioned.