Palantir's Explosive Rally Masks Valuation Risks: What Ken Griffin's Q3 Stock Moves Reveal About AI Investing

Billionaire Ken Griffin, whose Citadel Advisors has generated the strongest net gains of any hedge fund in history, made a striking portfolio shift in the third quarter. He dumped 1.6 million Amazon shares while simultaneously purchasing 388,000 shares of Palantir Technologies—a company that has skyrocketed 1,030% since January 2024, dwarfing Nvidia’s 281% gain over the same timeframe.

On the surface, this move appears to signal Griffin’s confidence in Palantir. Yet a closer examination of both positions and their underlying fundamentals reveals a more nuanced investment thesis.

The Palantir Phenomenon: Growth That Outpaced Valuation Reality

Palantir’s trajectory has been nothing short of remarkable. The artificial intelligence data analytics firm delivered third-quarter revenue growth of 63%, climbing to $1.1 billion and marking the ninth consecutive quarter of accelerating sales. Non-GAAP earnings more than doubled to $0.21 per diluted share, driven primarily by surging demand for its AI platform.

Industry analysts have taken notice. Forrester Research ranked Palantir as the most capable AI and machine learning platform available, positioning it above competitors like Google, Amazon Web Services, and Microsoft Azure. These accolades reflect genuine technological prowess and market traction across use cases ranging from supply chain optimization to financial fraud detection.

However, the stock’s valuation tells a different story. At 119 times sales, Palantir commands the highest price-to-sales multiple in the entire S&P 500—more than 2.6 times higher than AppLovin, the next-most expensive stock. This creates a stark disconnect: since January 2024, Palantir’s share price has increased 11-fold, yet revenue has barely doubled. The stock’s ascent reflects not operational improvement but rather investor appetite for increasingly expensive multiples, which jumped from 18 times sales nine months earlier.

This trajectory cannot sustain indefinitely. When market sentiment shifts and valuations compress, Palantir could face a correction exceeding 60% while remaining the S&P 500’s priciest stock.

Why Griffin Sold Amazon Despite Continued Holdings

Amazon represents the opposite investment profile: a mature technology giant deploying AI across three core business segments with tangible results.

In e-commerce, the company introduced Rufus, an AI shopping assistant projected to generate $10 billion in revenue this year alone. In advertising—a segment experiencing explosive growth—Amazon developed generative AI tools for content creation and agentic systems for campaign optimization. Most significantly, Amazon Web Services introduced custom AI chips designed to undercut Nvidia GPU pricing, alongside new AI agents automating development, security, and performance monitoring.

These investments translated into concrete performance. Third-quarter revenue increased 13% to $180 billion, with operating margin expanding 60 basis points and operating income surging 23% to $21.7 billion. Wall Street projects 18% annual earnings growth over the next three years, supporting a valuation of 33 times earnings—reasonable by historical comparison.

So why did Griffin reduce his Amazon position? The most likely explanation is profit-taking on a mature holding that already constitutes one of Citadel’s top 10 positions. This does not signal lost confidence but rather capital reallocation to capture different growth opportunities.

Griffin’s Real Message: Strategic Rebalancing, Not Conviction

A critical detail reveals the limited conviction behind Griffin’s Palantir purchase: the stock does not rank among his top 300 holdings. This suggests a tactical position rather than a core conviction bet—precisely the kind of opportunistic trade a sophisticated investor might make amid a speculative rally.

Griffin’s portfolio adjustments reflect a disciplined investment manager recognizing that Amazon offers sustainable, profitable growth at reasonable valuations, while Palantir presents binary risk: exceptional technology undermined by unsustainable market pricing.

For retail investors, the lesson is clear. Griffin’s moves should inspire confidence in his stock-picking ability—Citadel has outperformed the S&P 500 by 8 percentage points over three years. Yet individual holdings demand independent analysis. Palantir’s technological leadership does not justify its current valuation, regardless of who holds shares in their portfolio.