Short Sellers Target the “Most Expensive Stock” in the S&P — Is Palantir Worth Less Than $40?

TradingKey - AI trading enthusiasm remains strong, with AI analytics software company Palantir’s stock surging 130% year-to-date. While its Q2 earnings highlighted strong growth, its shockingly high valuation remains a key target for short sellers. Well-known short-seller and founder of Citron Research, Andrew Left, believes Palantir would still be “expensive” even if its stock fell 80%.

In an interview last Wednesday, August 13, Left said Palantir’s stock is severely overvalued. He emphasized on Monday that Palantir is a company detached from fundamentals and analysis.

Since the beginning of the year, Palantir has been a leading winner in the AI boom, with a 130% stock gain — far outpacing other popular tech stocks like Nvidia (+36%) and Meta (+31%).

According to FactSet, investor frenzy has driven Palantir’s current price-to-earnings (P/E) ratio to 588x, while Nvidia’s is only 58x.

DA Davidson noted that Palantir Technologies has become the most highly valued stock in the S&P 500 index, and it would need to sustain 50% annual growth for five consecutive years to bring its valuation multiple close to Microsoft’s level.

Since Left expressed his bearish view last week, Palantir’s stock has fallen 7% to date.

Left used ChatGPT developer OpenAI as a valuation benchmark, arguing that even if Palantir dropped 77% to $40, it would still be “generous.” OpenAI’s latest valuation has risen to $500 billion, with projected 2026 revenue of $29.4 billion, giving it a price-to-sales (P/S) ratio of about 17x.

Left pointed out that this valuation is already the highest among all scaled SaaS stocks. In other words, even if Palantir were “lucky” enough to achieve a valuation level comparable to OpenAI, $40 would still be expensive.

Wall Street’s views on this AI software stock are extremely divided, with price targets ranging from $45 to $200. According to TradingKey, the average analyst target price for Palantir is $152.19, implying a 14% downside from its current closing price of $174.

Analyst Price Targets for Palantir, Source: TradingKey

When announcing its Q2 results, Palantir CEO Alex Karp addressed market concerns about high valuation, saying skeptics are being weakened by the company’s significantly accelerating business growth and are “in some way surrendering.” Palantir’s Q2 revenue rose 48% year-over-year, and EPS jumped 77.8%, both exceeding market expectations.

While Left maintains his bearish stance, he also acknowledges that Palantir’s stock could continue rising in the coming months, as market irrationality often lasts longer than investors can endure.

Morningstar analysts said that while they believe the current market price has already detached from core intrinsic valuation methods, this growth momentum could still push Palantir’s stock higher.