Palantir shares drop as much as 10% after Michael Burry shorts stock

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Shares in Palantir fell as much as 10 per cent in morning trading on Tuesday, after star hedge fund manager Michael Burry revealed a short position against the data intelligence company.

Burry, whose role in predicting the collapse of the subprime mortgage market was depicted in the 2015 film The Big Short, disclosed a $912mn short against Palantir’s shares using derivatives on Monday. He also disclosed a short position in artificial intelligence chipmaker Nvidia.

Palantir’s chief executive Alex Karp said in response that the move represented a wager against artificial intelligence and that it was unclear whether it was specifically aimed at his company.

“The idea that chips and ontology are the ones you want to short is batshit crazy,” Karp told CNBC. “I do believe this behaviour is egregious and I’m going to be dancing around when it’s proven wrong.”

Burry did not respond to a request for comment.

Palantir lifted its 2025 revenue guidance on Monday to about $4.4bn from a previous estimate in August of $4.15bn. The figures exceeded Wall Street’s forecast of $4.17bn, according to Bloomberg.

Palantir said its revenue in the third quarter soared 63 per cent from the same period in the previous year to $1.18bn, while net income climbed to $476mn, beating analysts’ expectations of $435mn.

Analysts at Deutsche Bank said the company’s results were among the “most impressive” they had seen in the software industry, but that Palantir’s valuation was “still very difficult to wrap our heads around” which explained some of the market reaction on Tuesday.

The company’s shares had risen more than 170 per cent this year as of Monday’s closing price, on top of a blistering 340 per cent rally last year, bringing its market capitalisation close to $500bn.

The company trades at nearly 230 times forward earnings.

Karp hailed Palantir’s growth, pushing back against analysts who warn that a share price boom in recent years has left the group trading at a highly elevated valuation.

“Some of our detractors have been left in a kind of deranged and self-destructive befuddlement,” he said in a letter to shareholders.

“It has indeed been difficult for outsiders to appraise our business, either its significance in shaping our current geopolitics or its value in the vulgar, financial sense,” Karp added.

Palantir signed several notable deals in the quarter, including a long-term $10bn contract with the US government in July. US commercial revenues climbed 121 per cent to $397mn in the third quarter, while US government sales increased 52 per cent to $486mn. 

Chief technology officer Shyam Sankar told investors on Monday evening that the company hoped to benefit from global strife and US military modernisation initiatives that focus on AI and data analytics.

“The number of opportunities are great,” Sankar said. “America is involved with three conflicts from Europe, the Middle East and our own hemisphere right now. Things are also getting spicy in Africa.”

Investors have bought up the stock as part of a broad rally in AI companies that has also benefited big US tech groups such as Nvidia and Alphabet.

Securities and Exchange Commission filings published on Monday showed Burry’s hedge fund Scion Asset Management had bought put options in the quarter ending September 30 equivalent to 5mn Palantir shares, valued at about $912mn at the time of the disclosure.

Palantir, which was founded in 2003 by Karp, Peter Thiel and others, sells AI software to businesses and governments around the world. Its technology is used to collate and analyse data from supply chain analysis to surveillance of military targets and identification systems for undocumented migrants.

The company has built a strong following among retail investors, while Karp has developed a persona that includes extolling the view that the US should project strength overseas.

Nato member Poland signed a deal with Palantir and Anduril, a US-based defence start-up also backed by Thiel, last month as the country has taken steps to upgrade its military capabilities.

Palantir also announced a partnership with the UK government in September that included it investing up to £1.5bn in the region, including creating 350 new roles, and making the country the base of its European headquarters.