Closing The Palantir Short For A Loss, Despite Outperformance Risks

In the volatile world of high-growth tech stocks, Palantir Technologies (NASDAQ: PLTR) has emerged as a lightning rod for both bullish optimism and bearish skepticism. As of November 2025, the stock trades at approximately $165 per share, having surged 120–140% year-to-date and nearly 200% over the past 12 months according to market analysis. Yet, this meteoric rise has left many investors grappling with a critical question: Is Palantir's valuation justified by its fundamentals, or is the stock a precarious bet on speculative AI hype?

Fundamentals: A High-Growth Story With Legs

Palantir's Q3 2025 results underscore its position as a dominant force in enterprise software. The company reported 63% year-over-year revenue growth, with U.S. commercial revenue expanding at a blistering 121% pace according to Q3 earnings. This outperformance has been driven by a combination of factors: a $10 billion Department of Defense contract, expanding AI integration into its platforms, and aggressive international expansion as reported by analysts.

The Rule of 40-a metric combining revenue growth and adjusted operating margin-has become a hallmark of Palantir's business model. In Q3 2025, the company achieved a Rule of 40 score of 111%, reflecting both high growth and improving margins according to industry analysis. For context, most SaaS companies struggle to exceed 40%, making Palantir's performance exceptional.

Valuation: A Tale of Two Narratives

While Palantir's fundamentals are undeniably robust, its valuation metrics tell a different story. As of November 2025, the stock trades at a price-to-earnings (P/E) ratio of 386.32 and a price-to-sales (P/S) ratio of 62 according to market data. These figures starkly contrast with the SaaS industry averages of 57.31 (P/E) and 6.26 (P/S) according to industry benchmarks. Such a disconnect raises red flags for value-oriented investors, who argue that Palantir's multiples are straining under the weight of unrealistic expectations.

However, growth investors counter that Palantir's valuation is justified by its unique positioning in the AI and defense sectors. The company's recent partnership with PwC UK to deploy AI solutions and its collaboration with Fox News to enhance data analytics highlight its ability to monetize cutting-edge technology as reported in market analysis. Analysts project that Palantir's U.S. commercial revenue could grow by 61% year-over-year in Q4 2025, further cementing its role as a key player in the AI-driven enterprise software boom according to Q4 guidance.

Risks and Skepticism: Can the Hype Sustain?

Despite these positives, several risks loom over Palantir's valuation. First, the company's reliance on government contracts introduces operational volatility. While the $10 billion DoD deal is a tailwind, shifts in political priorities or budget constraints could disrupt future revenue streams as noted by market analysts. Second, insider selling has raised eyebrows among investors, with executives offloading shares at a pace that suggests internal caution according to stock data.

Moreover, the broader market's correction in AI-driven stocks-triggered by macroeconomic concerns and profit-taking-has caused Palantir's stock to pull back 15–18% since its November 3 earnings report according to market reports. This volatility underscores the fragility of a valuation that hinges on future growth rather than current profitability.

Conclusion: Closing the Short, But With Caution

For short sellers, Palantir's near-term trajectory appears perilous. The company's outperformance in Q3 2025, coupled with its strategic AI and defense partnerships, suggests that the stock may continue to defy gravity in the short term. However, the elevated P/E and P/S ratios indicate that much of this optimism is already priced in.

Investors considering closing a short position should weigh the risks of further outperformance against the long-term sustainability of Palantir's valuation. While the company's fundamentals are compelling, the market's appetite for speculative tech stocks is cyclical. A prudent approach would involve hedging against downside risk while acknowledging that Palantir's current multiples may not hold in a more rational market environment.

In the end, Palantir embodies the classic tension between growth and value investing. For those willing to ride the AI wave, the rewards could be substantial-but the risks of a valuation reckoning remain very real.