Jim Chanos Raises Red Flag On Palantir Stock - But Here's What Data Suggests

Palantir Technologies, Inc. PLTR has rallied about 46% for the year-to-date period, but short-seller Jim Chanos on Wednesday took to X, formerly Twitter, to express his concerns about the stock.

What Happened: Chanos, who is known for his short bets on Tesla and the now-defunct Enron, said in the last twelve months, short-sellers have bought a net 60 million Palantir shares.

A short-seller borrows security, betting its price will fall, and then sells it in the open market. If his bet proves right, the stock falls, and he buys it back at a lower price. He then returns the stock to his broker and pockets the difference.

Chanos apparently was striving to point out that investor sentiment toward the stock is negative. Palantir’s short ratio, which is the number of shares held as short divided by the stock’s average trading volume, was 0.95 as of Feb. 29, according to Yahoo Finance data. This suggests all open short positions can be covered in a single trading day.

The short ratio as a percent of the float was 5%, which does not point to extreme pessimistic sentiment.

Chanos also highlighted insider selling in Palantir stock. On Tuesday, Palantir co-founder Peter Thiel sold 7.045 million shares in accordance with the SEC’s Rule 10b5-1 trading plan adopted by the co-founder on December 12, 2023.

See Also: Best Artificial Intelligence Stocks

Why It’s Important: Palantir is touted as the next big AI play by bullish Wall Street analysts. Calling Palantir the “Messi of AI thesis,” Wedbush analyst Daniel Ives recently raised the price target for the shares from $30 to $35. “Our recent checks on Palantir in the field have been incrementally more bullish as we believe the AIP foundation is becoming viewed by many US enterprises as the “launching pad of AI use cases,” he said.

The company’s fourth-quarter results, released in early February, showed it was firing on all cylinders. The commercial business grew 70% in the fourth quarter, and the commercial customer count increased by 44%, thanks to the artificial intelligence revolution driving AIP deal flow.

Photo by Spyro the Dragon on Shutterstock

In premarket trading, Palantir rose 1.20% to $25.30, according to Benzinga Pro data.

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