Palantir’s miserable week mints billions for struggling shorts

Usa today news

17 hours ago

(Bloomberg/Carmen Reinicke) — Palantir Technologies Inc.’s losing streak has wiped out more than $73 billion in market value, handing a rare win to short sellers who are getting pounded after betting against this year’s Wall Street juggernaut.

Since hitting a record on Aug. 12, shares of the data analysis and software firm shed 17% through Wednesday’s close in a six-day losing streak. In early trading Thursday in New York, shares swung between gains and losses.

The drop has given short sellers more than $1.6 billion in profits, according to data from S3 Partners LLC. But that barely dents the $4.5 billion in paper losses traders have put up betting against Palantir this year, S3 data shows. While the stock is the worst performer in the S&P 500 Index over the past six sessions, it remains the benchmark’s biggest gainer for 2025 after soaring 106%.

That climb has pushed Palantir shares to a nosebleed valuation. Yet, contrarian traders have largely bailed on their bets against the stock over the past year because the momentum appears to be unceasing.

Short interest as a percentage of Palantir’s float, a measure of how many shares are available to borrow and bet against, has fallen to about 2.5% from nearly 5% a year ago. This suggests that short sellers covered their positions as the stock rose, according to Matthew Unterman, managing director of S3 Partners LLC.

“They either wanted to avoid being run over by a monster momentum trade or were forced out after the freight train hit,” said Steve Sosnick, chief strategist at Interactive Brokers LLC.

The recent decline in Palantir’s stock price is part of a wider drop in mega-cap technology companies that’s weighing on the S&P 500 and Nasdaq 100 indexes, as investors take some profits off the table and rotate into less expensive parts of the market.

“The selloff that we’re seeing in Palantir, it’s long overdue and it’s not because the short sellers have taken over,” Vikram Rai, portfolio manager and macro trader at Fny Capital Management LP. “When you have the likes of Google, Meta and Microsoft declining, then obviously the high-beta stocks, which are hopelessly overvalued, will decline more.”

Long-oriented investors have driven most of the upside in Palantir shares this year, as opposed to a short squeeze, where traders betting against a stock rush to buy it and get out of their trades before it goes any higher.

That said, signs are emerging that short sellers are gradually starting to ramp up bets against Palantir as the stock shows some weakness. Since the beginning of June, short interest has increased by about 10 million shares, according to S3 data. The Denver-based company has roughly 2.3 billion shares outstanding.

And even if the stock snaps its losing streak sometime soon, Wall Street pros say contrarian trading in Palantir could keep ticking higher along with the share price.

“If Palantir rallies even a bit, you will see the short seller is coming” back, Rai said, adding that he’d be cautious about stepping into a short position. “The stock has shown its hand, for lack of a better term, that there is a downward trend.”