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Cathie Wood’s Ark Invest is continuing its selling spree in Palantir Technologies (PLTR). Last week, the closely watched fund manager offloaded another more than $47 million worth of PLTR stock as part of a broader portfolio reshuffling. Wood is redirecting capital into other tech names like Shopify (SHOP), Advanced Micro Devices (AMD), and Amazon (AMZN).
Wood’s decision to trim her position in the data analytics firm raises questions about Palantir’s steep valuation. With market capitalization of $283 billion, Palantir provides sophisticated software platforms to intelligence agencies and corporations. In the last 12 months, PLTR stock has surged over 350%, crushing the broader market by a wide margin.
Woods’ timing has left investors wondering: Is she seeing warning signs others might be missing?
Palantir shares climbed 4.6% on Feb. 18 after the Teacher Retirement System of Texas revealed it added the artificial intelligence software company to its portfolio, despite mounting concerns about the stock’s unprecedentedly high valuation.
The pension fund, which manages about $210 billion in assets, purchased 521,000 PLTR shares worth $62 million during Q4 2024. While a relatively small position for the pension fund, the investment signals growing institutional confidence in the AI software maker. According to Nasdaq data, institutional ownership of Palantir has now risen above 52%, representing nearly 2.2 billion shares.
AI Platform Drives Record Growth as Commercial and Government Sectors Expand
Palantir’s meteoric stock rise has been primarily driven by the strong adoption of its Artificial Intelligence Platform (AIP). This platform allows organizations to integrate AI throughout their operations and create automated AI agents. Palantir, which started by serving government clients, has successfully expanded into commercial markets.
Notably, commercial customer growth accelerated at its fastest pace in 2024, rising 15% quarter-over-quarter. Commercial revenue jumped 31% in Q4, while government revenue, which makes up 55% of total revenue, grew even faster at 40% year-over-year.
“AIP continues to fuel new customer acquisition, as we have nearly five times the number of U.S. commercial customers as we did three years ago and significant expansion opportunities at existing customers,” Palantir Chief Revenue Officer Ryan Taylor said on the company’s fourth-quarter earnings call.
Is PLTR Stock Overvalued?
Wall Street expects Palantir to increase sales from $2.86 billion in 2024 to $4.76 billion in 2026. Comparatively, adjusted earnings are forecast to expand from $0.41 per share to $0.69 per share, while free cash flow is projected to improve from $1.14 billion to $1.74 billion over the next two years. Despite strong execution, Palantir trades at about 384x forward earnings and 73.5x forward sales, making it among the most expensive stocks in the S&P 500 Index ($SPX).
However, Palantir’s underlying business fundamentals remain strong. Management projects 31% revenue growth for 2025, and Palantir also reports consistent profit — a rarity among high-growth AI software firms.
Out of the 18 analysts covering PLTR stock, two recommend “Strong Buy,” 10 recommend “Hold,” one recommends “Moderate Sell,” and five recommend “Strong Sell.” The average target price for PLTR stock is $81.82, almost 30% below current levels.
Industry experts expect AI platform spending to grow at 40% annually through 2028, positioning Palantir to potentially capture significant market share. However, even bullish analysts suggest that current shareholders should consider rebalancing their positions, particularly if Palantir accounts for a large percentage of their portfolio, given the stock’s high valuation multiples.
