Palantir stock Plummets in November Amid Valuation concerns and AI Sector Sell-Off
November saw a important downturn for Palantir Technologies’ stock, marking its worst monthly performance since August 2023. The decline followed a broader retreat in the AI-focused stock market as investors increasingly scrutinized high valuations.
Despite reporting positive third-quarter results and exceeding revenue expectations for the second consecutive quarter, Palantir faced mounting skepticism from analysts at firms including Jefferies, RBC Capital Markets, and Deutsche Bank, who questioned the company’s risk/reward profile.
Adding to the downward pressure, investor Michael Burry, known for his accurate prediction of the 2008 financial crisis, publicly disclosed a short position in Palantir, alongside a similar bet against AI chipmaker Nvidia. Burry has voiced concerns that hyperscalers are artificially inflating their profits.
Palantir CEO Alex Karp vigorously defended the company’s valuation, accusing Burry of market manipulation in interviews with CNBC. However, these efforts failed to stem the negative investor sentiment. New agreements with PwC and FTAI announced in november did little to alleviate concerns.
The broader artificial intelligence sector experienced losses in November,with Nvidia dropping over 12 percent and Microsoft and Amazon declining around 5 percent. Quantum computing companies, Rigetti Computing and D-Wave Quantum, saw even steeper declines, losing more than a third of their value. Apple and Alphabet were the only companies among the top seven tech stocks to finish the month with gains.
Despite the November drop, Palantir continues to trade at a high forward earnings multiple, substantially exceeding those of tech industry leaders like Nvidia and Alphabet, fueling ongoing debate about the sustainability of its growth trajectory. Karp maintains that Palantir democratizes access to investment returns, but market skepticism persists.
