The third reason investors are excited about Palantir Technologies is its still nascent but rapidly expanding Foundry segment. The company’s global commercial customer count soared 51% to 498 by the end of September.

However, there are also two very tangible catalysts, beyond simple profit-taking, which may help explain why Englander and his team are headed for the exit.

For starters, Gotham, which has been Palantir’s primary profit driver, has a limited long-term ceiling. Though Palantir has landed numerous lucrative multiyear contracts from the U.S. government, this is a platform that only the U.S. and its allies have access to.

Perhaps the bigger issue for Palantir Technologies is its otherworldly valuation. While there’s no arguing that Palantir deserves some amount of valuation premium given its irreplaceability, shares of the company ended Nov. 15 at 43 times forecast sales for 2025 and a multiple of 140 times consensus forward-year earnings. These valuation multiples are consistent with previous bubble-bursting events in market-leading businesses.

But while Englander and his top advisors were sending shares of Palantir to the chopping block during the September-ended quarter, they were absolutely piling into rapidly growing China-based EV stock Nio (NYSE: NIO). Millennium Management’s 13F shows that 9,309,333 shares of Nio were purchased, which increased the fund’s stake by 196.3% in three months.

To be upfront, building an auto company from the ground up to mass production isn’t easy. Like virtually all EV producers not named Tesla and BYD, Nio is losing quite a bit of money. Building out the infrastructure needed to increase output, as well as spending big bucks on innovation, likely means Nio will be losing money for years to come.

Nio has also been contending with margin pressure, which was stoked by Tesla slashing the price of its EV fleet on more than a half-dozen occasions since 2023 began. While increasing competition is great news for the consumer, it’s quickly dashed hopes that EV margins would be noticeably better than internal-combustion engine vehicles.

But just because Nio is facing its fair share of challenges, it doesn’t mean the company’s future isn’t bright.

The first discernable step Nio has taken in the right direction is to sustainably increase its production. Since China removed its COVID-19 mitigation measures in December 2022 and supply chains have, for the most part, returned to normal, we’ve witnessed Nio’s monthly output jump from well below 10,000 units to frequently north of 20,000 units.

Yet the biggest advantage Nio possesses is its innovation — both traditional and out-of-the-box. Nio has been introducing a least one new EV annually, and recently launched its Onvo brand, which is a less-expensive EV that should prove more price-competitive with Tesla in China. It also upgraded its fleet to the NT 2.0 platform, which offers improved driver assistance technologies.

In terms of out-of-the-box innovation, Nio has been aggressively investing in battery swap stations, which should give the company a distinct EV infrastructure edge over its peers. High-margin battery swaps can be done in mere minutes, and should go a long way in keeping buyers loyal to its brand.

The other undeniable positive for Nio is its robust cash position. It closed out the June quarter with $5.7 billion in cash, cash equivalents, restricted cash, and various short/long-term investments. With losses expected in the coming years, Nio has the capital necessary to continue innovating, increasing production, and expanding its EV infrastructure.

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $870,068!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 18, 2024

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.

Billionaire Israel Englander Dumped 90% of Millennium’s Stake in Palantir in Favor of This Hypergrowth Electric-Vehicle (EV) Stock was originally published by The Motley Fool