Palantir has worst month in two years as AI stocks selloff

Palantir Technologies experienced a challenging November, with its stock plunging by 16%, marking its worst performance since August 2023. The downturn is attributed to a broader selloff in AI stocks, driven by investor apprehensions over inflated valuations. Notably, investor Michael Burry has intensified his stance against Palantir, betting against the company amidst these turbulent market conditions. The month began positively for Palantir, as the Denver-based analytics software firm exceeded Wall Street’s expectations for its third-quarter earnings and revenue. The company celebrated its second consecutive quarter of $1 billion in revenue, but concerns over high valuations led to a swift selloff following the earnings report. Analysts from Jefferies described Palantir’s valuation as 'extreme,' suggesting that investors might find more favorable risk-reward scenarios in AI competitors like Microsoft and Snowflake. Concerns were further echoed by RBC Capital Markets, which pointed to an 'increasingly concentrated growth profile' for Palantir. Deutsche Bank also expressed difficulty in comprehending the company's valuation. The situation was exacerbated by Burry’s public bet against Palantir and AI chipmaker Nvidia, a move that sparked discussions around market manipulation. In a vigorous defense, Palantir CEO Alex Karp took to CNBC to call out Burry’s actions as 'egregious,' stating, 'The idea that chips and ontology is what you want to short is bats--- crazy.' Despite the stock’s sharp decline, Palantir secured several deals this month, including a multi-year contract with consulting giant PwC aimed at accelerating AI adoption in the U.K. and a partnership with aircraft engine maintenance firm FTAI. However, these contracts did little to alleviate valuation concerns that have plagued AI-related stocks throughout November. The broader market has witnessed a significant retreat, with Nvidia down over 12%, and both Microsoft and Amazon dropping roughly 5%. Even quantum computing firms like Rigetti Computing and D-Wave Quantum have seen their valuations shrink by more than a third. Notably, Apple and Alphabet were the exceptions among the 'Magnificent 7' stocks, both posting gains for the month. Despite the steep decline, Palantir's stock still trades at an eye-watering 233 times its forward earnings, in stark contrast to Nvidia and Alphabet, which are valued at approximately 38 times and 30 times their earnings, respectively. Karp, known for his staunch defense of the company, recently emphasized that Palantir is providing everyday investors with opportunities previously reserved for top-tier venture capitalists. 'Please turn on the conventional television and see how unhappy those that didn't invest in us are,' he remarked during an earnings call. 'Enjoy, get some popcorn, they're crying. We are every day making this company better and we're doing it for this nation, for allied countries.' Palantir has not issued any comments regarding the current market situation.