It’s been a bad month for Palantir. Or half-month, to be more specific.
Since reaching a record high on August 12, shares have been mired in a steep sell-off, falling 17%.
The tumble stood in stark contrast to the stock’s 147% year-to-date ascent up until that point, a rally driven by fervid retail investors and market-wide excitement around the growth potential of AI.
Wall Street analysts say a combination of three major factors has Palantir’s army of loyal retail investors feeling more hesitant on the stock:
1. Short-seller interest
BRENDAN MCDERMID/Reuters
Andrew Left, the founder of Citron Research — best-known for his previous bets against Hertz and Nikola — recently revealed that his firm had taken a short position in Palantir. In a mid-August note, he cited the company’s “absurd” valuation, adding that he believed the firm was divorced from fundamentals.
Left spoke about his bold call to Fox Business, which was likely the catalyst that sparked fear in many retail investors holding the stock, Louis Navellier, the founder of Navellier & Associates, told Business Insider.
“The Citron guy went on [TV] and slammed it. And that kind of started its descent,” Navellier said. “Anytime a stock gets extended, the short-seller is likely to try to prick that bubble.”
Other short-sellers have joined the fray in recent weeks. At the end of July, Palantir had a short interest of 54.7 million shares, representing around 2% of all its public stock. Short interest in the firm has increased around 2% since the prior month, according to data from MarketBeat.
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2. Profit taking
Investors have been using Palantir’s monster rally in 2025 as an opportunity to cash in some of their shares. At its peak, shares were up nearly 150% from the start of the year.
That applied to large firms all across the tech sector, according to Tyler Radke, a senior equity research analyst at Citi, said last week that this profit-taking trend applied to all sorts of mega-cap tech firms. He pointed to the recent decline in Microsoft stock, despite the software giant’s blowout earnings for the second quarter.
“I just think it’s a bit of repositioning some of the volatility,” Radke said. “I think just for Palantir, just the track record of buying these high multiple stocks at these levels hasn’t been great,” he added.
“Profit-taking is normal. If a stock goes up 15%, it’s got to pull back 5 to 10%,” Navellier said.
3. Institutional selling
Market makers on Wall Street regularly sell high-performing stocks in their algorithmic trading programs, Navellier said. That’s because many firms try to implement mean reversion in their trading strategy, which is the idea that asset prices tend to eventually fall back to their historic average.
That’s made the recent profit-taking among Palantir investors worse, he said.
“What was going on that Monday through Wednesday is we had a very serious mean reversion program hitting all the winners, and they were hitting anything that was up,” Navellier said of the prior week, pointing to the broader sell-off in markets and tech stocks.
A comeback in sight
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Despite the latest sell-off, Palantir is still the top-performing stock in the S&P 500. Its still-remarkable rally in 2025 has been driven by a handful of factors, including a slew of lucrative, long-term contracts it secured with the US government.
The company also blew the doors off its latest earnings report. Palantir notched $1 billion in revenue for the first time ever, marking a 48% increase from the same quarter the prior year.
Navellier, whose firm manages over $800 million in client assets, said he had no plans to sell Palantir anytime soon. The stock remains one out of eight gems on his “A grade” list, due to its strong fundamentals, he said.
“I don’t mind if it pauses for a month or two. All I care about is when it announces next time it blows it out of the park and guides higher,” he said of Palantir’s next earnings report.
Palantir’s retail investors, many of whom share a cultlike following to the stock, have also sounded mixed about the outlook. But strains of optimism still exist about the company’s future, despite the recent selling pressure.
“Lmao. Anything citron touches is immediately a long. They basically always cause a stock to crash before ppl are like wait…. Then price surges,” one Reddit user on r/WallStreetBets wrote in a thread about Nvidia’s valuation.
“Nobody wanted it at 6$ in 2022,” another user said.
Neil Rozenbaum, one retail trader who said he sold most of his shares of Palantir last year but still remained invested in the company, told BI he regretted unloading the stock.
“I viewed Palantir as expensive,” he said, adding that he now saw the company as an “AI winner” and would consider buying more in the future.
Palantir’s turnaround story will likely begin with analysts start revising their forecasts for the stock higher, or if Palantir reports a new business contract or guidance for its hiring anytime soon, Navellier speculated.
“It’s just that [Fox] ruined the party by having the Citron guy on. That’s all,” he said.
