Palantir Stock vs. Super Micro Stock: Billionaire Israel Englander Buys 1 and Sells the Other.

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Billionaire Israel Englander founded Millennium Management in 1989. The firm has since become the second most successful hedge fund in history (behind Ken Griffin’s Citadel) in terms of net gains since inception, according to LCH Investments. That makes Englander a good source of inspiration for individual investors.

In the second quarter, Englander sold 7.7 million shares of Palantir Technologies (NYSE: PLTR), reducing his position by 59%. He simultaneously purchased 553,323 shares of Super Micro Computer (NASDAQ: SMCI), increasing his stake by 807%. Both stocks have more than doubled since January 2023, though Englander evidently had more conviction in Super Micro during the June quarter.

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Here’s what investors should know.

Palantir specializes in big data analytics. Its primary software products, Foundry and Gotham, let businesses collect data, develop machine learning (ML) models, and surface insights through analytical applications. Its adjacent artificial intelligence (AI) platform, AIP, brings support for large language models (LLMs) and generative AI to its core software.

In August, Forrester Research recognized Palantir as a leader in artificial intelligence and machine learning platforms, calling AIP “one of the strongest offerings in the AI/ML space.” In September, Dresner Advisory Services listed Palantir as a top-ranked vendor in a market study on artificial intelligence, data science, and machine learning software.

Palantir announced excellent financial results in Q3, exceeding Wall Street’s expectations on the top and bottom lines. Revenue increased 30% to $726 million, the fifth straight sequential acceleration, and non-GAAP earnings jumped 43% to $0.10 per diluted share. On the earnings call, CFO Dave Glazer attributed the strong performance to “unprecedented demand” for AIP.

Looking ahead, the International Data Corp. (IDC) estimates spending on AI platforms will increase at 41% annually through 2028. That will undoubtedly be a tailwind for Palantir, but a strong presence in a quickly growing market does not necessarily mean Palantir is a good stock to buy. Investors seem to be ignoring the company’s unsustainable valuation.

Wall Street expects Palantir’s adjusted earnings to increase at 27% annually through 2025. That makes the current valuation of 168 times adjusted earnings look absurdly expensive. Indeed, Wall Street has set the stock with a median 12-month target price of $38 per share. That implies 36% downside from its current share price of $59. Investors should steer clear of this stock right now.

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