'High Valuation Debate' Palantir, Individual Investors Continue Buying Spree

Annual Net Purchases by Individual Investors Near $8 Billion

Despite ongoing debates over the high valuation of artificial intelligence (AI) company Palantir, individual investors have continued to buy its shares this year.

Reuters Yonhap News

According to CNBC on the 25th (local time), market research firm VandaTrack estimated that, as of December 8, individual investors had purchased $8 billion worth of Palantir shares since the beginning of the year. This represents an increase of more than 80% compared to the previous year and about a 400% increase compared to 2023.

VandaTrack predicted that Palantir would rank among the top five stocks in terms of net purchases by individual investors this year. Other stocks in the top ranks alongside Palantir include technology stocks such as Tesla and Nvidia, as well as exchange-traded funds (ETFs) tracking the S&P 500 index. Viraj Patel, Deputy Head of Research at VandaTrack, commented, "For individual investors, Palantir is now considered part of the 'representative AI group.'"

Thanks to this strong individual buying trend, Palantir's stock has risen more than 150% so far this year, making it highly likely to achieve a triple-digit growth rate for the third consecutive year. Its cumulative three-year growth rate stands at around 3,000%, far surpassing the S&P 500 index (about 80%) and the Nasdaq index (about 120%) over the same period.

Palantir develops AI software that analyzes data for governments and large corporations. Due to its business structure, which includes both government and private sector clients, the company has sometimes been described as "an enterprise with an ambiguous identity." Paxton Earl, a software sector investment banker, noted, "There used to be jokes asking what exactly Palantir does, but a closer analysis shows its business is very solid." He added, "Its revenue sources are diverse and not limited to the defense sector, as it also collaborates with private companies such as Ferrari and Wendy's."

CNBC pointed out that, unlike most companies that only hold Q&A sessions with analysts after earnings announcements, Palantir also takes questions from individual investors. At the end of last year, Palantir CEO Alex Karp personally expressed his gratitude to individual investors.

In contrast to the keen interest from individual investors, Wall Street's perspective remains relatively cautious. According to financial information provider LSEG, the average analyst rating for Palantir is "hold." Gil Luria, an analyst at investment bank D.A. Davidson, analyzed that Palantir's price-to-earnings ratio (PER) for the past 12 months is about 450 times, far exceeding the S&P 500 average of 28 times, and commented, "It is difficult for institutional investors to consider it for investment."

Michael Burry, known as the real-life model for the film "The Big Short," argued last month that the AI industry is in a serious bubble, and revealed on December 4 that he had taken a short position on Palantir, citing its high PER as the reason.