Palantir Technologies Inc. (NYSE: PLTR) stock continues to ride high, but hedge fund titans are easing off the throttle.
Hedge Funds Take Profits, Not Exit
Palantir's stock has captured market attention with its meteoric rise to a 52-week high of $66.07, but hedge funds are stepping back-albeit cautiously.
Late Jim Simons' Renaissance Technologies and Cathie Wood's ARK Investment Management offloaded a combined over 3 million shares in the third quarter, trimming their stakes while still holding significant positions.
These moves, coinciding with Palantir's soaring market cap of nearly $150 billion, have sparked speculation about profit-taking. Renaissance's portfolio allocation to Palantir dropped to 2.15%, while ARK Investment cut its exposure to 3.75%.
Despite these reductions, neither fund has signaled a complete exit, underscoring confidence in Palantir's longer-term potential.
PLTR's Lofty Valuation Draws Skepticism
At a P/E ratio of 328.85 and a forward multiple of 143x (according to Benzinga Pro data), Palantir's valuation continues to polarize investors.
Skeptics like Hataf Capital argue that these metrics reflect unrealistic expectations:
"The market is effectively pricing in not just continued excellence but perfect execution for years to come."
The third quarter earnings showcased impressive growth, with the company improving profitability and solidifying its AI-driven narrative. But critics caution that maintaining such momentum might prove challenging.
Retail Investors: A Double-Edged Sword
Retail investors make up about 50% of Palantir's shareholder base, a factor that could amplify volatility.
Hataf Capital warns: "This ownership structure could amplify volatility in both directions, potentially leading to rapid multiple compression if market sentiment shifts."
Adding to the concerns, CEO Alexander Karp's insider sales-totaling $1.2 billion over the past three months-have raised red flags about insider confidence, despite the company's strong public messaging.
A Crossroads For Palantir
While hedge funds appear to be trimming their sails, Palantir stock's performance hinges on the company's ability to meet sky-high expectations.
With its AI-driven narrative and robust growth story, Palantir remains a stock to watch-but the road ahead may not be as smooth as its recent rally suggests.