Palantir endures worst monthly drop since August 2023 as AI valuation fears drag prices down

Palantir’s stock PLTR yesterday closed November deep in the red with a 17% plunge in what is now its worst monthly fall since August 2023, according to data from CNBC.

The crash came as investors pulled money from AI-linked stocks over rising fear around rich prices after famous shorter Michael Burry disclosed a $900 million short position on the Peter Thiel-backed company.

Palantir CEO strikes defiant tone

Burry had accused hyperscalers of artificially boosting earnings tied to the AI trade. Palantir CEO Alex Karp appeared twice in one week on CNBC and responded to Burry by straight up accusing him of market manipulation, and calling the investor’s actions “egregious.” Alex said, “The idea that chips and ontology is what you want to short is bats— crazy.”

Alex continued to defend the company in a letter to shareholders, saying the company now gives everyday investors access to returns once “limited to the most successful venture capitalists in Palo Alto.”

On the earnings call, he added, “Please turn on the conventional television and see how unhappy those that didn’t invest in us are. 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.”

But November did not actually start off bad for Palantir, as it actually opened the month with strong earnings. Cryptopolitan reported that Palantir beat Wall Street’s third-quarter revenue and profit estimates, delivering its second straight $1 billion revenue quarter.

Sadly, concerns over valuation took over right after the results, and the stock slid as traders moved to cut risk.

Soon after the earnings drop, Jefferies sent a note to clients on November 6 calling Palantir’s valuation “extreme” and saying that traders would find better risk and reward in other AI names such as Microsoft and Snowflake.

RBC Capital Markets followed with its own note the very next day, pointing to Palantir’s “increasingly concentrated growth profile.” Deutsche Bank also jumped in to call the company’s valuation “very difficult to wrap our heads around.”

Even as shares stayed weak, Palantir still announced new business in November, signing a multi-year contract with PwC aimed at speeding up AI adoption in the U.K. It also closed a deal with FTAI, a company that works in aircraft engine maintenance. The deals brought fresh activity to the business but failed to slow the selling tied to valuation fears that stayed fixed across the AI market.

AI stocks slide as valuation fears spread

The fall in Palantir tracked a wider retreat across expensive tech stocks. Throughout November, investors dumped high-priced AI names on fears that the space had grown overstretched. Nvidia fell more than 12% for the month. Microsoft and Amazon each dropped about 5%.

The losses were heavier in quantum stocks. Rigetti Computing and D-Wave Quantum both lost over one-third of their market value before the month ended. Among the so-called Magnificent 7, only Apple and Alphabet finished November with gains.

Even amid the steep crash, Palantir’s stock still trades at about 233 times forward earnings, per Yahoo Finance’s data. By comparison, Nvidia trades near 38 times, while Alphabet trades around 30 times as of Friday’s close. So this gap keeps traders locked on how much future growth is already priced into the shares.

On November 4, Morgan Stanley raised its price target on Palantir to $205 from $155 while keeping an Equal Weight rating. The company pointed to the company’s ninth straight quarter of accelerated growth, along with Q4 growth guidance and strong new business bookings in Q3.

Freedom Capital later flagged longer-term risk, pointing to a possible slowdown in U.S. commercial growth after a record year, pressure on defense budgets, and margin strain from heavy hiring tied to AI work.

Freedom also said the PLTR stock remains elevated and warned that the current pace of growth is “unlikely to persist indefinitely.”

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