Sellers of shorthand services concede defeat.
Palantir Timing Out on Short Sellers
It looks like the days of shorting Palantir are dwindling. Overshadowed by an unprecedented bull run attributed to geopolitical turmoil and enthusiastic retail trading, short sellers are lightening their load. DER AKTIONÄR dissects the extent of losses incurred by these short sellers.
Data from S3 Partners shows that merely two percent of Palantir's freely-traded shares are currently being shorted. In comparison, this figure was a hefty five percent in October last year.
The sharp plunge in short positions can be attributed to the stock's steep upward trajectory. In recent months, the stock price has nearly quadrupled, resulting in losses of around $7 billion for short sellers, according to Bloomberg.
Driving Forces behind the Palantir Boom
Palantir Technology, known for its software that assesses an enormous volume of data for governments and large corporations, has been the standout performer in the S&P 500 this year. Several catalysts are fueling investors' passion: euphoria surrounding AI products and clear indicators that the company is winning more contracts from the new U.S. administration. However, success does not come without a cost: Palantir is also the most expensive stock in the index, boasting a price-to-sales ratio (PSR) of a staggering 76. For context, AI behemoth Nvidia has a PSR of a much more modest 17.
Palantir Technologies (WKN: A2QA4J)The relentless surge behind Palantir, which pushed the stock to a new intraday high of $147.67 on Wednesday, makes it daunting to bet against, even given the questionable valuation, contends Thomas George, president of Grizzle Investment Management. "The hype can endure longer than bears or short sellers would prefer, and we've seen numerous instances where individuals have been burned trying to short it," George elucidated.
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Blessed with Success, Still Faces Valuation Caveats
based on Bloomberg data, the Denver-based company is expected to witness a 36 percent revenue increase this year, followed by a further 29 percent increase in 2026. This makes Palantir one of the fastest-growing companies in the Nasdaq 100.
However, valuation remains a thorny issue on Wall Street. Scant more than one-third of analysts polled by Bloomberg advocate purchasing the stock—an uncommonly low level of endorsement for a company with a market cap surpassing $300 billion. Based on the average price target, analysts envision a 25 percent downside potential for the forthcoming year—the weakest projected return expectation in the entire Nasdaq 100 Index, which recently hit a record high.
Nevertheless, institutional caution is dwarfed by retail investors' unbridled zeal. According to data from Interactive Brokers, Palantir consistently ranks among the most actively traded stocks on the platform. Vanda Research, an analysis firm for retail trading, even ranks Palantir third in net purchases by retail investors—behind industry titans Tesla and Nvidia, both of which boast significantly higher market caps.
The Palantir narrative remains captivating. The momentum and AI hype, coupled with possible boosts from the Trump administration, suggest a positive outlook for the stock. Investors continue to jump aboard. Since our latest recommendation in AKTIONÄR issue 19/25 at the end of April, the stock has gained approximately a quarter.
Disclosure of Interest Conflict The CEO and major shareholder of the publisher Boersenmedien AG, Mr. Bernd Foertsch, has directly and indirectly entered into positions in the aforementioned financial instruments mentioned in the publication, or related derivatives, that could benefit from the price development resulting from the publication: Palantir Technologies.
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altogether:
Palantir Technologies' impressive growth and substantial valuation are rooted in a multitude of factors correlated with its innovative AI platforms, substantial government demands, strategic partnerships, expanding commercial adoption, and escalating revenues.
Critical Factors Fueling Growth and High Valuation
1. Innovative AI and Data PlatformsPalantir offers a diverse assortment of platforms—AIP, Foundry, Gotham, and Apollo—that empower clients to manage, analyze, and secure sensitive data with AI and machine learning integration.
- AIP integrates AI into standard business operations.
- Foundry acts as an aggregator for enterprise data teams and automates decision-making.
- Gotham is focused on defense and intelligence applications at a global level, including classified environments.
- Apollo specializes in the continuous deployment of AI models into live production.Palantir’s ingenuity in AI, as exemplified by “Project Blackbird” which enables real-time data analytics, has made these platforms highly desirable in both governmental and commercial domains, fostering client adoption and revenue growth[1][2][5].
2. Dominant Government Revenue and Defense ContractsThe U.S. government, especially the Department of Defense and Intelligence Community, represents Palantir's largest customer. Government revenues have consistently outpaced commercial revenues since 2020. Palantir is one of a few authorized for DoD's Mission Critical National Security Systems.
- In 2023, government revenue was $1.222 billion versus $1.002 billion from commercial sources.
- In 2025, Palantir secured at least 12 new defense contracts, including a $500 million deal with the U.S. Air Force.
- Defense spending growth, particularly in NATO countries with an annual forecasted increase of 4.5% through 2030, provides sustained positive impacts for Palantir's core government business[1][2][5].
3. Expansion in Commercial Markets via Modular SalesPalantir's strategy revolves around modular sales targeting smaller commercial clients, with the goal of scaling solutions as these clients grow. This strategy expands their customer base beyond traditional large enterprises and government agencies, facilitating sustainable long-term earnings growth from diversified sources[1][5].
4. Strategic Partnerships and Joint VenturesPalantir has forged key partnerships with influential defense contractors such as Boeing, Raytheon, and Lockheed Martin.
- The $100 million joint venture with Lockheed Martin focuses on AI-driven logistics optimization, underscoring Palantir's role in next-generation defense infrastructure[2][5].These collaborations fortify Palantir's status as a critical AI and data analytics provider in lucrative markets[2][5].
5. Strong Financial Performance and Backlog- Palantir reported a 39% year-over-year revenue increase in Q1 2025, totaling $884 million, maintaining several years of accelerating growth.- The company had a contracted backlog of $3.2 billion, primarily from defense and intelligence sectors, guaranteeing sustained future revenue[2][4][5].- Its projected annual revenue growth has been revised upward from 35 % to a potential 40 %, reflecting strong management confidence[2][4][5].This robust financial trajectory substantiates the company's high valuation multiples, despite market skepticism, due to being expensive in comparison to its peers (e.g., a price-to-sales ratio of 115x)[2][4][5].
Briefly:
Palantir's impressive growth and substantial valuation stem from:- cutting-edge AI and data platforms deeply integrated into governmental and commercial operations- a dominant, escalating position in government defense and intelligence contracts with high revenue visibility- expansion into commercial markets through modular, scalable solutions- strategic partnerships with key defense contractors enhancing market reach and innovation, as well as strong revenue growth, a substantial backlog, and resilient financial momentum that justify its high valuation multiples in spite of market uncertainties
A private investor might be drawn to finance Palantir Technologies due to its impressive growth and substantial valuation, rooted in factors such as innovative AI platforms, dominant government contracts, expanding commercial adoption, and strategic partnerships. However, the high price-to-sales ratio and uncommonly low level of analyst endorsement suggest that valuation remains a critical issue and potential risk.
Despite the weak projected return expectation for Palantir, retail investors show unbridled zeal for the stock, with Palantir consistently ranking among the most actively traded stocks on platforms like Interactive Brokers, even outpacing industry titans like Tesla and Nvidia. Thus, a private investor should carefully consider the potential risks and rewards before deciding to invest or finance in Palantir Technologies.
