Stanley Druckenmiller is a billionaire investor who manages capital at his fund, the Duquesne Family Office. Over the past few years, he has made some eyebrow-raising moves related to investing in artificial intelligence (AI) stocks. Perhaps the biggest head-scratcher was his selling Nvidia stock when everyone else seemed to be buying. In fairness, though, Druckenmiller has since expressed some regret about exiting his Nvidia position.
While Nvidia has been one of the largest beneficiaries of a bullish AI narrative, it's far from the only growth stock out there. Ironically, however, Druckenmiller just dumped his fund's entire stake in yet another scorching hot AI stock.
Will Druckenmiller come to regret this decision, too? I don't think so. Read on to find out which AI darling the Duquesne Family Office just exited, and learn why I think this was a savvy decision.
Which AI darling did Druckenmiller dump now?
According to its most recent 13F filing, the Duquesne Family Office has completely exited its position in Palantir Technologies (PLTR -1.19%). In the table below, I've summarized Druckenmiller's exposure to Palantir stock over the last year.
| Category | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|---|---|---|---|---|---|
| Shares | 769,965 | 769,965 | 41,710 | 41,710 | 0 |
Data source: 13f.info.
Per the data above, it appears that the majority of Duquesne's exposure to Palantir was trimmed in the middle of last year. Over the last six months, Druckenmiller's fund held a small position in Palantir stock -- enjoying record gains as the company remained one of the best-performing stocks across the S&P 500 and Nasdaq-100 indices. It begs the question: Why sell now?
Image source: Getty Images.
Why might Druckenmiller have dumped Palantir stock?
Since going public in 2020, Palantir stock has gained well over 1,000%. That's an unusually high return in this short a time duration. However, looking at Palantir's parabolic rise through this lens is a bit misleading. The reason I say that is because the majority of gains in the stock have actually occurred over the last 18 months. When you look at it that way, it becomes even more questionable just how much further the stock can run right now.
PLTR PS Ratio data by YCharts.
In the graph above, I've benchmarked Palantir's valuation against a peer set of high-growth software stocks on a price-to-sales (P/S) basis. Not only is Palantir the obvious outlier here, but just look at how much expansion its valuation multiples have experienced over the last year relative to its peers.
As of the closing bell on May 23, Palantir boasted a market capitalization of $291 billion -- considerably more than Salesforce (which I predicted would happen), despite being a much smaller, less diversified, and less profitable business.
In my eyes, Druckenmiller isn't going to roll the dice on any more momentum fueling Palantir. I think he decided to take his gains and redeploy capital into more appropriately valued businesses.
Should you sell Palantir stock right now?
One of the secrets to investing is that there is never really a perfect time to sell a stock. What I would point out about Palantir's valuation right now is that its P/S multiple is more than double the levels that Amazon and Cisco peaked at during the dot-com bubble, and considerably higher than where Nvidia reached throughout the AI revolution.
I bring this up because as sobering as it may be to realize, even the hottest growth stocks experience pullbacks from time to time. As Palantir stock continues to rocket higher, I suspect expectations will rise around its quarterly earnings results. This presents a risk in that Palantir could deliver a monster earnings report, but ultimately fail to live up to unjustifiably lofty expectations -- hence, the stock could drop off a cliff instantly.
While I remain a long-term bull, I wouldn't blame investors who trim their Palantir positions right now. One prudent approach could be to sell enough to at least recoup your initial investment. Another strategy could be to collect some gains if you're up by 15% or more on your position (essentially double the long-run average annual return of the S&P 500).
