Why Palantir's 1,030% Rally Since Early 2024 Caught the Eye of Top Hedge Fund Operators (And Why Caution Is Warranted)

The Trade That’s Making Headlines

When seasoned investors like Ken Griffin, who helms Citadel Advisors, make portfolio adjustments, the market takes notice. In Q3, the legendary hedge fund—known for consistently outperforming the S&P 500 by significant margins—made a notable shift: reducing Amazon holdings by 1.6 million shares while simultaneously acquiring 388,000 shares of Palantir Technologies.

What’s striking isn’t just the trade itself, but the trajectory of the stock being purchased. Palantir has climbed an eye-watering 1,030% since January 2024, leaving even Nvidia’s impressive 281% gain in the dust over the same timeframe. For retail investors watching from the sidelines, it raises an obvious question: Is this institutional buying signal worth following?

Amazon’s AI Pivot Is Actually Working

Before assuming the Citadel exit signals trouble, consider what’s happening beneath the surface at Amazon. The tech giant has woven artificial intelligence throughout its three core engines: e-commerce, advertising, and cloud computing.

E-commerce operations have been turbocharged by AI innovations. The company deployed generative tools for inventory optimization, customer service automation, and last-mile delivery efficiency. Perhaps most notably, its AI shopping assistant Rufus is tracking toward $10 billion in annual sales—a meaningful revenue stream that barely existed two years ago.

The advertising division represents a faster-growing category within digital advertising, and Amazon’s custom generative AI tools—capable of producing images, video, and audio at scale—are reshaping how brands approach campaign creation and product research.

Cloud infrastructure through AWS has become the proving ground for enterprise AI. The division launched Bedrock for application development, engineered custom chips that offer cost advantages over competitors’ solutions, and recently introduced AI agents automating software development and security operations.

These investments are materializing into hard results. Q3 revenue reached $180 billion with 13% year-over-year growth, while operating margins expanded and operating income surged 23% to $21.7 billion. Wall Street forecasts 18% annual earnings growth over the next three years, making the current 33x earnings multiple defensible.

So why divest? Likely a straightforward profit-taking decision. Amazon remains a top-10 position for Citadel Advisors, suggesting Griffin maintains conviction despite trimming exposure.

Palantir’s Explosive Growth Meets an Unsustainable Valuation Problem

Now, the acquisition of Palantir shares tells a different story—one complicated by valuation extremes.

The company’s ontology-based artificial intelligence platform serves government and commercial sectors with use cases spanning supply chain analytics, fraud detection, and battlefield optimization. Industry analysts at Forrester recently ranked it as the most capable AI/ML platform available, outpacing offerings from major tech incumbents.

The financial performance has matched the hype. Q3 revenue accelerated 63% to $1.1 billion—the ninth consecutive quarter of acceleration—while non-GAAP earnings per share more than doubled to $0.21. Management attributed the surge to surging demand for its AI platform capabilities.

But here’s where the narrative fractures: valuation has become comical. Palantir trades at 119x sales, making it the most expensive stock in the S&P 500 by an enormous margin. The next-closest competitor, AppLovin, sits at 45x sales. This means Palantir could halve its current value and remain the index’s most expensive stock.

The math is brutal. Since January 2024, the stock price has multiplied 11x, yet revenue has increased less than 2x. The divergence is almost entirely attributable to multiple expansion—investors increasingly paying premium multiples for the same business. Back then, the stock traded at 18x sales. That premium cannot perpetually widen.

The Hedge Fund Hedge on Conviction

Here’s a reality check on Griffin’s intentions: Palantir doesn’t crack Citadel Advisors’ top 300 holdings, suggesting the position is meaningful but not a cornerstone conviction trade. This isn’t the bet of someone betting the farm on the company.

The Takeaway

The contrast between these two moves illustrates a sophisticated portfolio rebalancing. Amazon represents a proven artificial intelligence story backed by reasonable valuation. Palantir represents transformative technology operating at valuation levels that defy historical precedent. Both can be true: exceptional businesses can trade at prices that eventually punish investors who chase momentum at any price.

For those watching legendary investors’ moves, the lesson isn’t which stock to buy, but understanding the difference between a company’s potential and the price you’re paying to access it.