pltr stock: Cathie Wood sells, but why?

Cathie Wood Bails on Palantir: Is the AI Hype Train Losing Steam?

Cathie Wood's Ark Invest made some interesting moves this week, most notably reducing its stake in Palantir (PLTR) while simultaneously doubling down on crypto exchange Bullish (BLSH). The Palantir sell-off is particularly eyebrow-raising, considering the company just posted a stellar Q3 earnings report.

Palantir reported revenue of $1.18 billion, significantly exceeding the anticipated $1.09 billion. Adjusted earnings per share came in at 21 cents, beating the forecasted 17 cents. The real kicker? U.S. commercial revenue skyrocketed 121% year-over-year, reaching $397 million. These numbers aren’t just good; they're exceptional. So, why the sell-off?

Ark Innovation ETF (ARKK) shed 38,338 Palantir shares, which, at Monday's closing price of $207.18, translates to roughly $7.9 million. This follows another $3.9 million worth of shares dumped just days prior. It's a consistent pattern, not a one-off blip.

Decoding the Data: What's Ark Seeing That We're Not?

Here's where it gets interesting. Wood has been a vocal proponent of disruptive technologies, and Palantir certainly fits that bill, especially with its growing AI capabilities. The company's Gotham and Foundry platforms are increasingly being used for AI-driven analytics. But, let's consider a possibility: Are Wood's funds rotating out of AI plays after a period of heavy investment and hype?

Perhaps Ark Invest is rebalancing its portfolio, shifting capital from companies already benefiting from the AI boom to those poised for future growth. The move into Bullish (BLSH) supports this. Ark acquired 238,346 shares of the crypto exchange across multiple ETFs, valued at approximately $11.9 million. Bullish, backed by Peter Thiel, is betting big on crypto. The implicit bet here is that there's more upside in crypto right now than in AI-adjacent plays like Palantir.

I've looked at hundreds of these filings, and this particular shift is unusual. It's not simply a matter of trimming positions after a price run-up. It feels more strategic. One potential factor is the nature of Palantir's revenue. While commercial revenue is booming, a significant portion still comes from government contracts. These contracts, while lucrative, can be subject to political headwinds and unpredictable renewal cycles. Is Wood betting that the perceived risk of government dependency outweighs the current growth?

Consider Benzinga’s Edge Stock Rankings. Palantir stock has a Momentum in the 97th percentile. What this means is that, per Benzinga’s proprietary algorithm, Palantir's stock momentum is stronger than 97% of all other stocks. But momentum is a lagging indicator.

The Thought Leap: How reliable are these "percentile" rankings anyway? What data are they based on, and how is that data weighted? Without knowing the underlying methodology, these rankings are just marketing fluff.

Beyond Palantir: A Broader Portfolio Shift?

Ark's other trades on Monday offer further clues. The fund increased its position in Beam Therapeutics Inc (BEAM) by a total of 336,257 shares, split between ARKG and ARKK. At the same time, it reduced its stake in Roku Inc (ROKU) by 21,793 shares and Guardant Health Inc (GH) by 13,426 shares.

This suggests a continued bullish outlook on biotech and a slightly more cautious stance on streaming and diagnostics. Perhaps Wood sees more long-term growth potential in gene editing than in sectors already facing intense competition and market saturation. (The biotech sector is notoriously volatile (and risky)).

And this is the part of the report that I find genuinely puzzling. Palantir’s earnings call highlighted the company’s advancements in AI and its potential to revolutionize various industries. The narrative is compelling, and the numbers back it up. So, what gives?

One possibility is that Wood believes the market has already priced in Palantir's AI potential. The stock has had a significant run-up in recent months, and perhaps Ark sees limited further upside. In contrast, Bullish, despite the inherent risks of the crypto market, might offer a higher potential return.

Is Cathie Wood Right to Jump Ship?

Ultimately, only time will tell if Cathie Wood's decision to reduce her Palantir holdings was the right one. The company's fundamentals remain strong, and its AI capabilities are undeniable. However, Ark Invest's move serves as a reminder that even the most promising companies are subject to market fluctuations and shifting investment strategies. It's a reminder that even in the age of AI, human judgment—and data-driven analysis—still matters.

The AI Party Might Be Over