Cathie Wood Takes Profits in Palantir. Should Investors Follow Suit?

Cathie Wood's Trading Activity - Cathie Wood, CEO of Ark Invest, has been selling shares of Palantir Technologies since September 2024, although it still constitutes over 5% of her ETF and is her fifth-largest position [1] Palantir's AI Leadership - Palantir established itself as an AI leader in 2024, leveraging its data gathering and analytics expertise to become a key software vendor for the U S government, particularly for mission-critical tasks like monitoring terrorists and tracking COVID-19 cases [2] Insider Selling Trends - Palantir executives and insiders, including CEO Alex Karp and Chairman Peter Thiel, have been aggressively selling shares since September 2024, with Karp selling $1 86 billion worth of shares and Thiel selling over $1 billion [3] Commercial Success and Revenue Growth - Palantir's AI platform (AIP) has driven significant commercial success, with U S commercial revenue increasing by 54% year-over-year and U S customer count growing by 77% last quarter [4] - The company has seen early success with commercial customers through proof-of-concept work and is now focusing on moving these customers from prototype to production [11] Stock Performance and Valuation - Palantir's stock had a strong performance in 2024, being added to the S&P 500 and Nasdaq-100 indexes, but its valuation has become stratospheric, trading at a forward price-to-sales (P/S) ratio of 36 5 times based on 2025 analyst estimates [5][6] - The stock's valuation is considered frothy, with a 300% gain over the past year, prompting investors to consider taking profits [7] Future Growth Prospects - For Palantir's stock to continue performing well, the company will need to accelerate revenue growth, particularly by transitioning commercial customers from proof-of-concept to production and improving international revenue [8] - The company has already seen revenue growth accelerate with its largest customer, the U S government, which grew by 40% last quarter [11] AI Application and Workflow Focus - Palantir's early AI success stems from its focus on real-life use cases and the application layer of AI, particularly in ontology, where it pairs digital assets with real-world counterparts to create operational AI systems [10]