Palantir Technologies (PLTR +1.45%) has been one of the market's standout AI (artificial intelligence) winners in 2025. The company, which provides an AI platform for data and analytics for commercial enterprises and government organizations, has seen its already blistering growth accelerate even more recently. This, combined with growing investor excitement about AI, has helped the stock soar 150% year to date as of this writing.
With such a big run-up in the rearview mirror, is it time for Palantir investors to sell their shares? Doing so may not be easy. After all, selling a winner can feel like abandoning the best thing happening in a portfolio. Additionally, doing so in a taxable account can mean handing a meaningful slice of gains to the IRS.
Still, this is where Warren Buffett's old line about being "fearful when others are greedy" earns its keep. Put simply, I believe some euphoria has crept into the value of Palantir's stock, significantly increasing valuation risk. Selling now, therefore, is likely a good decision.
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A great business
It helps to acknowledge why the stock has been so strong. The more than doubling of the stock's value this year reflects improving fundamentals and a market that has been willing to pay up for AI exposure.
To be clear: Palantir's putting up impressive numbers when it comes to its financial results. Third-quarter revenue, for instance, rose 63% year over year to about $1.2 billion, with U.S. revenue up 77% year over year. And U.S. commercial revenue grew 121% year over year to $397 million.
Management is framing the moment as a step-change tied to its artificial intelligence platform (AIP). CEO Alex Karp said, "These results make undeniable the transformational impact of using AIP to compound AI leverage."
Driving home why these results have been so impressive, they represent an acceleration from the growth it was delivering for investors. In Q2, Palantir reported revenue growth of 48% year over year -- well below the company's 63% growth in Q3.
Also worth noting, Palantir raised its full-year 2025 revenue guidance when it reported its third-quarter results. Management said it now expects total revenue for the year to be between $4.396 billion and $4.400 billion. This is far above the guidance for full-year revenue of $4.142 billion to $4.150 billion that management had provided when it reported its second-quarter results.
In short, the bull case is not hard to understand.
NASDAQ: PLTR
Key Data Points
The problem is valuation
The issue is not whether Palantir can execute. It is what the market is already pricing in.
As of this writing, the stock trades at a valuation multiple of about 126 times sales. And just to be clear, that's a multiple of sales, not earnings. Palantir's price-to-earnings ratio? 448. Of course, its forward price-to-earnings is 192, showing how the company's strong top-line momentum is expected to translate into operating leverage and huge earnings growth over the next 12 months.
In other words, expectations are high. Very high.
A valuation like that makes future returns fragile. If growth slows from "spectacular" to merely "very good," the growth stock can still fall a long way as the valuation multiple compresses. This means that even if Palantir continues to post strong results, investors can wind up with mediocre returns -- all because the price paid for the stock was simply too high.
But is selling really the right decision? After all, nobody likes selling a stock that keeps going up, and nobody likes triggering a tax.
Fortunately, there is a middle ground investors can take. It might make sense to consider trimming a position instead of selling the whole thing. This could mitigate portfolio damage if shares take a hit, while maintaining exposure if Palantir exceeds the market's high expectations for it.
