Palantir Stock Is Near a Record High. Should Investors Sell?

For Palantir Technologies (NASDAQ: PLTR) shareholders, the hardest part of investing may not be buying the stock. It may be deciding when to sell.

After a tremendous run, Palantir is trading near its all-time high. Investors who bought early may be sitting on substantial gains, while newer shareholders may wonder whether the best returns are already behind them.

My view: Don't sell Palantir simply because its stock has soared. But don't hold it blindly, either. Existing shareholders should reassess three things: the company's growth prospects, the return its current valuation can deliver, and the amount of their portfolio tied up in the stock.

A great business can remain a great investment for years. But the price you pay, or continue holding at, still matters.

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Palantir's business gives shareholders a reason to stay

Palantir's recent results show why investors are optimistic. In the second quarter of 2026, revenue jumped 93% year over year to $1.94 billion. U.S. commercial revenue surged 149% to $764 million, while U.S. government revenue grew 90% to $809 million. Adjusted operating margin reached 62%, and management raised its full-year revenue growth guidance to 82%.

These aren't just impressive growth rates; they instead suggest Palantir is turning demand for artificial intelligence (AI) into substantial revenue while maintaining strong profitability. But strong operating performance doesn't guarantee strong stock returns, which brings us to the more difficult question.

Is future growth already priced in?

Palantir's valuation leaves investors with high expectations to meet. On Oct. 15, 2026, the stock closed at $200.50, giving the company a market capitalization of approximately $482 billion. Its trailing price-to-earnings ratio was around 171.

At that valuation, investors aren't merely expecting Palantir to succeed. They're paying a substantial premium for continued success. Suppose Palantir keeps growing but eventually trades at a lower earnings multiple. The stock could deliver disappointing returns, even if the business performs well, but if growth also slows, the pressure could be even greater.

This is the risk existing shareholders must weigh against the possibility of further gains. The question isn't whether Palantir can become a much bigger company, but whether its future earnings can grow enough to justify today's price.

Nobody knows the answer with certainty. That's why shareholders should regularly revisit their expected returns rather than assume that yesterday's gains will continue.

Three questions every shareholder should ask themselves

1. Would I buy Palantir at today's price?

Imagine you held your Palantir shares in cash instead. Would you use that money to buy the stock at its current valuation?

If yes, holding may be entirely reasonable. You believe the company's future returns justify the risk. If no, investigate why. Perhaps you think the valuation is excessive, or perhaps another investment offers a better opportunity. You don't necessarily need to sell, but you should have a clear reason to continue holding.

To this end, your original purchase price is irrelevant to this decision. What matters is the return you can reasonably expect from today.

2. Has Palantir become too large a part of my portfolio?

Imagine Palantir accounts for 30% of your portfolio. If the stock falls 50%, your total portfolio would lose 15% of its value, assuming everything else remains unchanged. Could you tolerate that without being forced to sell at the worst possible time?

If not, trimming some shares may be sensible, even if you remain bullish. You can reduce concentration risk without abandoning a company you believe has a promising future. The objective isn't to eliminate volatility, but to prevent one investment from jeopardizing your long-term financial goals.

3. Has anything changed in the investment thesis?

Watch whether Palantir can sustain commercial growth, expand customer relationships, and convert demand into profits and cash. Also pay attention to its competitive position and the cost of compensating employees with stock.

If growth remains strong and the business continues strengthening, that supports holding. If growth deteriorates materially or the company's competitive advantage weakens, reassess your position.

A falling stock price alone doesn't prove the thesis is broken. Equally, a rising stock price doesn't prove it's intact.

What does it mean for investors?

There is no one-size-fits-all approach. Fortunately, existing Palantir shareholders don't need to choose between selling everything and holding forever.

If they believe the business outlook supports an attractive prospective return and the position remains appropriately sized, they should continue to hold. Conversely, it makes sense to trim if the stock dominates their portfolio or the valuation leaves too little room for disappointment.

And above all, selling makes sense if they think the investment thesis is broken or the expected return no longer justifies the risk.

In short, don't sell Palantir stock just because you've made money. Don't hold just because you've made money, either. Hold because the business, valuation, and potential future returns still make sense.

Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.