The stock market just threw a two-day party, and it’s got everyone scratching their heads. Small-cap stocks and homebuilders, usually the wallflowers of Wall Street, danced into the spotlight with back-to-back gains. Meanwhile, the momentum darlings tripped over their own feet, leaving investors wondering if the Federal Reserve’s rate-cutting fairy tale is rewriting the script.
Palantir Technologies, the AI analytics superstar, is the market’s prom king, strutting with a 144% gain in 2025, making it the S&P 500’s top dog. Its stock price is ballooning at 242 times forward earnings and 137 times sales, numbers so high they could give an accountant vertigo. FactSet data suggests Palantir’s valuation is less a number and more a cosmic event.
Enter Andrew Left, the short-selling sage from Citron Research, who’s waving a red flag like a matador facing a bullish stampede. On Fox Business, Left praised Palantir’s CEO Alex Karp and the company’s mission control data wizardry but warned its stock price is floating in outer space. He quipped that even if Palantir were the greatest company since sliced bread, it’s still priced for a 66% haircut.
Left’s not just throwing shade; he’s crunching numbers. He argues no company—not even one as shiny as Palantir—can sustain a price-to-earnings ratio that looks like it belongs on a rocket launch countdown. A 50% correction, he says, is practically written in the stars.
But Left’s got his own drama. The SEC and Justice Department are breathing down his neck over short-selling shenanigans, with a trial looming in March after a court swatted down his dismissal bid. Still, he’s not all doom and gloom, balancing his Palantir short with bullish bets on Apple and Amazon.
Then there’s the Databricks plot twist. This rival, reportedly eyeing an IPO this year, boasts similar revenue and a bigger corporate client list, which could rain on Palantir’s parade. Left’s betting that when Databricks hits the market, it might steal some of Palantir’s thunder.
Meanwhile, small-cap stocks are having a moment, basking in the glow of renewed investor love. The Russell 2000, a small-cap index, jumped 2.3% over two days, per Bloomberg data, as traders bet on a softer Fed policy loosening the purse strings. It’s as if these underdogs finally got a bone to chew on.
Homebuilders are also hammering out gains, with the S&P Homebuilders Index up 3.1% in the same period, according to Yahoo Finance. Lower interest rate hopes are putting a spring in their step, as cheaper borrowing could mean more houses and happier shareholders. Who knew bricks and mortar could party so hard?
The Federal Reserve’s rate-cutting buzz is the DJ spinning this market’s tunes. Posts on X suggest traders are dreaming of a September rate cut after a lackluster July jobs report, with CNBC reporting Wall Street’s betting big on it. But with no official word, it’s all speculation and summer cocktails for now.
Palantir’s Q2 earnings added fuel to the fire, with U.S. commercial revenue soaring 93% year-over-year and total revenue up 48%, per their own report. They’re guiding for a record-breaking Q3 with $1.083-$1.087 billion in revenue, a 50% jump. It’s enough to make investors wonder if Palantir’s stock is a rocket or a firecracker.
Yet, Left’s warning echoes: can Palantir keep defying gravity? He points out that no company with such sky-high multiples has avoided a crash landing. Databricks’ potential IPO looms like a storm cloud, ready to challenge Palantir’s AI crown.
Small-caps and homebuilders, on the other hand, are riding a different wave. The NFIB Small Business Optimism Index hit 100.3 in July, a five-month high, signaling confidence in economic growth. Homebuilders are banking on lower rates to keep the construction cranes swinging.
The market’s mood swings have analysts buzzing. Some, like those at The Motley Fool, see Palantir’s stock as frothy, predicting a possible dip to $89 by 2028 if growth slows. Others, like Benzinga, are downright bullish, forecasting a climb to $182.58 by year’s end.
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