Palantir Stock Tanks: Here’s Why Investors Are Panicking Today

Palantir's stock just hit an air pocket—and the descent is getting ugly.

What's driving the sell-off?

Revenue growth is slowing. Big contracts aren't landing. And the AI hype? It's looking more like hope than reality right now.

Institutional investors are bailing. Retail's following. The usual 'buy the dip' crowd? They're quiet for once.

Maybe it's the valuation. Maybe it's the macro mood. Or maybe—just maybe—the market's finally realizing that not every tech story deserves a premium multiple. Typical Wall Street—overpay today, panic tomorrow.

Citron says Palantir's valuation is irrational

Citron cited the most recent valuation of OpenAI, which on Friday was confirmed to be raising another $6 billion in funds at a $500 billion valuation, as proof that Palantir's stock is overvalued.

The short seller points out that this $500 billion valuation puts OpenAI's price-to-sales (P/S) at roughly 17x. If you apply the same P/S to Palantir, the stock WOULD trade at just $40, a steep drop from today's $162 per share.

Citron went on to say that at this P/S of just shy of 17, OpenAI "has the highest multiple of any scaled SaaS stock in the world," and that this multiple "in itself is extreme," meaning that for Palantir, even at $40 a share, it would still be an incredibly expensive stock.

Image source: Getty Images.

Investor beware

While short reports should always be taken with a heavy grain of salt (after all, the company profits off of a drop in Palantir's stock price), I have to agree with Citron's evaluation -- and have been saying so for some time now.

The scale and pace of OpenAI's growth and the potential it has to transform the entire economy far outweigh that of Palantir. Yet its stock carries a P/S almost 7.5 times higher than OpenAI's (if it were publicly traded).

I would note that there is one major caveat: Palantir is profitable, something that OpenAI decidedly is not (it is burning cash at an incredible pace). Still, the point stands, given the disparity between the two valuations.

Palantir has to continue growing at a breakneck pace for many, many years to begin to justify this. That level of perfection is just not reasonable.