The New AI Era: How Palantir is Shaking Up the Market

The rise of Artificial Intelligence (AI) takes a remarkable turn in 2024, and the stocks once known as the "Magnificent Seven" need to make room for fresh players. A variety of emerging companies are stepping up to showcase their ambitions in the AI world alongside the established heavyweights of the technology industry. Particularly exciting is the example of Palantir Technologies. The company's shares have risen by an impressive 283% in 2024, making it the top performer in the S&P 500. Despite these extraordinary gains, a well-known investor has decided to drastically reduce her holdings. Cathie Wood of Ark Invest, known for her transparent trading strategies, has reduced her shares in Palantir by about 1.9 million shares between September 11 and November 15. During this period, the stock soared by a remarkable 89%. Palantir's impressive stock performance has been significantly driven by an excellent third-quarter report, marked by a steep price increase. However, such a rapid rise demands a critical evaluation of the company's valuation. Palantir's price-sales ratio currently stands at 60, significantly higher than comparable companies in the Software-as-a-Service (SaaS) sector. It is important to emphasize that Palantir is trading at 60 times its revenue, not its earnings. Although positive net profits and free cash flow are being achieved, these figures remain modest.