TL;DR
Palantir shares fell 16% in November, their worst month since August 2023, as investors sold off AI stocks over valuation concerns. Despite posting its second consecutive billion-dollar revenue quarter, analysts called the company’s valuation “extreme” and famed investor Michael Burry bet against it.
AI Stocks Face Valuation Reckoning
November proved brutal for Palantir investors. The Denver-based software analytics provider saw shares plunge 16% as a broader selloff gripped AI-related stocks. The decline came despite strong fundamentals—Palantir topped Wall Street’s third-quarter expectations and posted its second straight billion-dollar revenue quarter.
The problem lies squarely with valuation. Jefferies analysts called Palantir’s price tag “extreme,” suggesting investors would find better risk-reward opportunities in Microsoft and Snowflake. RBC Capital Markets raised concerns about the company’s “increasingly concentrated growth profile,” whilst Deutsche Bank admitted the valuation was “very difficult to wrap our heads around.”
Even after the steep November decline, Palantir trades at 233 times forward earnings—compared to Nvidia at 38 times and Alphabet at 30 times.
High-Profile Critic Emerges
The selloff intensified when filings revealed Michael Burry, famous for predicting the 2008 housing crisis and portrayed in “The Big Short,” had bet against both Palantir and Nvidia. Burry subsequently accused hyperscalers of artificially boosting earnings.
Palantir CEO Alex Karp responded forcefully, appearing twice on CNBC in one week. He accused Burry of “market manipulation” and called the investor’s actions “egregious,” declaring the idea of shorting AI chips and ontology “bats--- crazy.”
Looking Forward
The November rout wasn’t confined to Palantir. Nvidia dropped over 12%, whilst Microsoft and Amazon each fell roughly 5%. Quantum computing stocks suffered even more severely, with Rigetti and D-Wave losing more than a third of their value. Only Apple and Alphabet among the Magnificent Seven finished November with gains.
Palantir did secure some wins during the turbulence, including a multiyear contract with PwC to accelerate AI adoption in the UK. However, broader market concerns about AI valuations and potential bubble conditions continue to weigh on the sector.
Source: CNBC