A spike in the prevalence of short positions is no strange occurrence following strong stock market gains. Still, for traders betting against Palantir (NASDAQ: PLTR), the April 3 session might prove an uncommon bonanza.
Specifically, the government-linked technology and artificial intelligence (AI) company’s shares enjoyed a strong rally on Wednesday, April 2, as PLTR equity rose 3.27% during the day and closed at $87.45.
However, Thursday’s pre-market was rather devastating for Palantir stock, which collapsed 5.74% by press time and is changing hands at $82.43 in the extended session.
Simultaneously, yesterday’s rally brought a noteworthy rise in the PLTR short volume ratio, which hit 50.89, per the data Finbold retrieved from Fintel on Thursday.
Under these circumstances, the increase in the proportion of short positions means that the downward predictions will likely become a self-fulfilling prophecy and make the bears a fortune.
Is Palantir stock a short-seller’s dream?
Why the Thursday pre-market selloff has affected most assets and asset types as it has been driven primarily by President Donald Trump’s Liberation Day tariff announcements, Palantir is a better shorting opportunity than most.
To begin with, the company is part of the greater AI ecosystem, meaning it is an active participant in a sector that has grown highly overvalued. This makes it a prime contender for a crash should the economy move even more decisively toward a recession.
The danger the AI industry is in is also evident in the increasing fears that the data center infrastructure buildup has generated a bubble.
As that particular business is an important driver of Nvidia’s (NASDAQ: NVDA) revenue, its bursting could collapse the semiconductor giant’s shares, which, due to their size and psychological importance, could generate a devastating chain reaction.
Despite Palantir correcting significantly since the start of 2025, analysts were relatively certain it had already exceeded a fair valuation in the second half of 2024 when PLTR stock was still in the $40-50 range.
Although it is noteworthy that fears over the sustainability of Palantir shares’ rally were already prevalent when President Trump was expected to be as bullish a catalyst as President-Elect Trump was.
Featured image via Shutterstock
