Palantir Plummets 8.8% as Short Seller Siren Sounds: Is the AI Bull Run Over?

Summary
• Palantir (PLTR) tumbles 8.8% to $158.65, marking its fifth consecutive session of declines.
• Short seller Andrew Left’s bearish report and valuation concerns dominate headlines.
• Microsoft (MSFT), sector leader, dips 1.55%, signaling broader software sector jitters.

Palantir’s freefall has ignited a firestorm in the AI software sector, with the stock trading near its 52-week low of $29.31. The selloff follows a scathing report from Citron Research’s Andrew Left, who argues PLTR’s $190 peak is detached from fundamentals. With turnover surging to 116 million shares and a dynamic PE of 348x, investors are scrambling to parse whether this is a correction or a collapse.

Short Seller Andrew Left's Bearish Bet Ignites Sell-Off
The 8.8% intraday plunge in Palantir’s stock is directly tied to Andrew Left’s latest report, which compares PLTR’s valuation to OpenAI’s speculative multiples. Left’s assertion that PLTR should trade at $40—a 76% discount to its 52-week high—has triggered a wave of profit-taking and algorithmic selling. Compounding this, only two of eight Wall Street analysts maintain a 'buy' rating, with Jefferies and HSBC warning of a valuation 'disconnected from even optimistic growth scenarios.' The sell-off also coincides with geopolitical optimism (Russia-Ukraine peace talks, U.S.-China trade easing) dampening demand for defense-linked AI plays.

Software—Application Sector Volatility Amid AI Hype
The Software—Application sector, led by Microsoft’s -1.55% decline, reflects broader unease with high-growth AI stocks. Palantir’s 8.8% drop far outpaces the sector’s typical volatility, underscoring its speculative nature. While Microsoft’s earnings-driven pullback signals macroeconomic caution, PLTR’s collapse is more idiosyncratic, driven by valuation skepticism and short-seller pressure rather than sector-wide trends.

Options Playbook: Capitalizing on PLTR's Volatility
• 200-day average: 130.07 (far below current price)
• RSI: 64.6 (neutral but bearish bias)
• MACD: 9.24 (signal line 9.52, bearish crossover)
• Bollinger Bands: Lower band at 142.19 (critical support)

PLTR’s technicals paint a bearish picture, with the stock trading near its 52-week low and a Kline pattern signaling a short-term bearish trend. The Direxion Daily PLTR Bull 2X Shares (PLTU) -17.7% plunge mirrors the stock’s freefall, amplifying leveraged ETF risks. For options, two contracts stand out:

• PLTR20250829P150
- Put option, strike $150, expiration 2025-08-29
- IV: 61.74% (high volatility)
- LVR: 49.62% (moderate leverage)
- Delta: -0.285 (moderate sensitivity)
- Theta: -0.071 (time decay)
- Gamma: 0.020 (price sensitivity)
- Turnover: $2.68M (liquid)
- Payoff: At 5% downside (150.72), intrinsic value = $0.72; premium = $1.55 → 46% return potential.
- Why it works: High IV and moderate delta balance risk/reward, ideal for a 5% move.

• PLTR20250829P155
- Put option, strike $155, expiration 2025-08-29
- IV: 58.56% (moderate volatility)
- LVR: 33.33% (conservative leverage)
- Delta: -0.393 (strong sensitivity)
- Theta: -0.017 (minimal time decay)
- Gamma: 0.024 (high responsiveness)
- Turnover: $3.57M (liquid)
- Payoff: At 5% downside (150.72), intrinsic value = $4.28; premium = $1.55 → 275% return potential.
- Why it works: High gamma and low theta make it ideal for a sharp drop, with turnover ensuring liquidity.

Aggressive bears should prioritize PLTR20250829P155 for its 275% upside in a 5% move. Conservative bears may opt for PLTR20250829P150 for a safer 46% return. Both contracts benefit from PLTR’s elevated IV and bearish technicals.

Backtest Palantir Stock Performance
The backtest of Palantir (PLTR) after a -9% intraday plunge shows favorable performance, with win rates and returns indicating positive short-to-medium-term gains. Here's a detailed analysis:1. Frequency and Win Rates: The event occurred 65 times over the backtested period. The 3-day win rate was 69.23%, the 10-day win rate was 70.77%, and the 30-day win rate was 89.23%. This suggests that following a -9% plunge, the stock tends to recover or exceed its previous price levels within a short period.2. Returns: The average 3-day return was 3.23%, the 10-day return was 7.27%, and the 30-day return was 24.91%. This indicates that while the stock may experience short-term volatility, it often rebounds, leading to positive returns in the following days and weeks.3. Maximum Return: The maximum return during the backtest was 38.27%, which occurred on day 59 after the plunge. This highlights the potential for significant gains if the stock is held for an extended period after a sharp decline.In conclusion, while a -9% intraday plunge in PLTR may present a short-term challenge, the backtest indicates a strong tendency for the stock to recover and even exceed its previous price levels in the following days and weeks. This makes it an attractive opportunity for investors looking to capitalize on potential rebounds.

Act Now: PLTR at Pivotal Crossroads—Defensive or Aggressive?
Palantir’s 8.8% drop has exposed the fragility of its AI-driven valuation, with short sellers and analysts now in lockstep. While the stock’s 52-week low of $29.31 remains a distant target, near-term support at $142.19 (Bollinger lower band) and $145 (options chain liquidity) are critical. Microsoft’s -1.55% decline as sector leader suggests broader macroeconomic caution, but PLTR’s move is uniquely tied to valuation skepticism. Investors should watch the $145 level—a breakdown could trigger a cascade to $130.07 (200-day MA). For those seeking action, the PLTR20250829P155 put offers explosive potential if the sell-off accelerates.