Cathie Wood’s Palantir Sell-Off: A Warning Sign for Investors?
Renowned investor Cathie Wood, CEO and CIO of Ark Invest, has been steadily selling shares of Palantir Technologies (NASDAQ: PLTR) since September 2024. This move comes after Wood initially bought the stock in 2021, exited the position in early 2022, and re-entered in May 2023. As of now, Palantir still accounts for over 5% of her fund and remains her fifth-largest position.
Insider Selling: A Red Flag?
Wood’s selling spree coincides with an increase in selling by Palantir executives and insiders, who have been aggressively offloading shares since September. CEO Alex Karp has been particularly active, selling $1.86 billion worth of shares through option exercises and immediate sales. Chairman Peter Thiel has also sold over $1 billion worth of shares, while numerous other executives and directors have followed suit.
Palantir’s AI Leadership
Despite the selling, Palantir has established itself as an artificial intelligence (AI) leader in 2024. The company’s AI platform (AIP) has been successful in helping commercial customers with various use cases, resulting in a 54% year-over-year increase in U.S. commercial revenue and a 77% jump in U.S. customer count last quarter.
AIP’s Real-World Applications
Palantir’s AI success stems from its focus on applying the technology to real-life use cases, rather than building better AI models. The company’s work in ontology, which pairs digital assets with their real-world counterparts, has enabled its AIP to become an organization’s AI operational system. This approach has led to rigorous testing and implementation of solutions that deliver tangible outcomes.
Government Contracts and Revenue Growth
Palantir has also seen revenue growth at its largest customer, the U.S. government, as it begins to adopt AI. The company has announced several large government contracts and reported 40% growth in U.S. government revenue last quarter.
Valuation Concerns
However, Palantir’s stock has traded at a lofty valuation, with a forward price-to-sales (P/S) ratio of 36.5 times based on 2025 analyst estimates. This is significantly higher than the average SaaS multiple of 20 times forward sales seen in 2020 and 2021.
Should Investors Follow Suit?
Given the insider selling and frothy valuation, it may be wise for investors to take profits alongside Palantir’s executives. The stock has already gained 300% over the past year, and its current valuation leaves little room for error. For the stock to continue performing well, Palantir will need to demonstrate a significant acceleration in revenue growth, particularly in its international segment.
A Word of Caution
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