Palantir Technologies Inc.’s stock surge has wiped out all of the year-to-date paper gains for short sellers, saddling them with billions in losses.
Investors betting against the software defense company have accumulated paper losses of $3 billion with the stock up 30% Tuesday, according to data from S3 Partners LLC. The cohort is now in the red for the year as shares are poised for their best daily performance in two years.
The reversal of fortunes comes after Palantir boosted its full-year revenue and income forecasts on Monday. The stronger outlook fueled a rally in shares that put an end to short sellers’ positive run. Prior to Monday’s close, the stock’s sluggish performance had minted short sellers a paper gain of about $2.7 billion year to date.
Despite the surge, Palantir shares are stll down more than 8% so far this year, on track for their worst annual performance since 2022.
Investor Michael Burry of The Big Short fame in November disclosed bearish wagers on Palantir and Nvidia Corp., helping to kick off a prolonged slip in Palantir shares. In June, Burry said in his Substack newsletter that he covered half of his short position in Palantir.
Meanwhile, some analysts remain cautious on the company given its sky-high valuation. Palantir shares trade at more than 83 times forward earnings, a hefty premium to the broader market.
“We are fundamental fans, but the setup gets harder from here,” Jefferies analysts led by Brent Thill wrote in a note, maintaining an underperform rating, adding that they see better risk versus reward in other AI winners including Microsoft Corp., Amazon.com Inc. and Snowflake Inc.
Still, some investors’ fears were allayed when Palantir Chief Executive Officer Alex Karp said Monday that commercial demand for the firm’s data analytics tools is “otherworldly.” They were concerned that tools from AI developers such as Anthropic PBC could hurt the company’s software business.
Palantir even gained a new Wall Street bull in Deutsche Bank analyst Brad Zelnick following the full-year forecasts. Zelnick upgraded shares to buy from hold and maintained a $200 price target, saying that following another beat and raise quarter, Palantir deserves its premium valuation. Nearly 70% of analysts covering the company rate it a buy, according to data compiled by Bloomberg.
“Palantir is operating several steps ahead of the rest of software in converting AI demand into real customer value,” Zelnick said in a note. “As much of application software is still trying to prove AI is truly incremental, Palantir increasingly looks like a time traveler, having already arrived in the AI future others are still aspiring towards.”
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