Palantir Technologies has become a significant player in the AI landscape as its stock saw an impressive surge of 150% year to date in 2025, driven by robust demand for its AI-driven data and analytics platform. The company, catering to both commercial and government sectors, is enjoying increasing investor enthusiasm around artificial intelligence, which has contributed to its recent momentum.
As Palantir’s stock has skyrocketed, shareholders find themselves grappling with a tough decision: whether to sell their shares after such a substantial increase. Selling a successful investment can feel counterintuitive, particularly when it risks relinquishing a significant performer in the portfolio. Compounding the dilemma is the potential tax burden that comes with capital gains in taxable accounts.
There’s a school of thought, echoed by investment giants, that suggests caution during times of exuberance in the market. This perspective indicates that the elevated valuation of Palantir’s stock may pose risks moving forward, prompting speculation that now might be a sensible moment to consider selling.
Examining the rationale behind the soaring stock prices reveals that they are closely linked to impressive financial results. For example, Palantir reported a remarkable 63% increase in year-over-year revenue for the third quarter, reaching approximately $1.2 billion, with U.S. revenue growing by 77%. Notably, the company’s U.S. commercial revenue saw an astronomical 121% increase year over year, totaling $397 million. CEO Alex Karp emphasized the company’s AI platform as crucial to this growth, stating that the results demonstrate the transformative impact of their technology.
This upward trajectory in revenue was noteworthy, particularly as it marked an acceleration from the previous quarter’s growth rate of 48%. Additionally, Palantir raised its full-year revenue guidance for 2025, projecting total revenue between $4.396 billion and $4.400 billion, significantly surpassing previous estimates.
Despite these compelling business fundamentals, concerns around valuation loom large. Currently, Palantir’s stock is trading at an extraordinary 126 times its sales and a staggering 448 times earnings, with a forward price-to-earnings ratio of 192. Such elevated multiples imply that investor expectations are exceedingly high, rendering future returns potentially vulnerable.
When a stock is highly valued, even a moderation in growth rates can lead to significant declines in its stock price. Thus, even continued strong performance might not guarantee favorable returns for investors who have paid a premium.
This predicament leaves investors pondering whether to sell or hold their shares. Although entirely liquidating a position might be seen as a loss of a winning investment, some experts suggest a more moderate strategy—trimming positions rather than full sales. This approach allows investors to reduce risk exposure in the face of potential declines while still maintaining participation should Palantir exceed the lofty expectations that the market has set for it.
