Question: I bought Palantir Technologies (PLTR) stock when it was trading at $8. It’s now at $180 and I’ve made $1 million. What should I do?
Answer: Nicely done!
Palantir is one of the greatest investing success stories of our lifetime. Since going public in 2020, its shares are up almost 1,800% – a massive return. It’s one of the best-performing stocks in 2025 and now sports a market cap close to half a trillion dollars.
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Once a low-profile number cruncher for the military and intelligence services, the company has now positioned itself as the Pentagon’s nerve center for artificial intelligence (AI) and as a major player in business analytics.
The problem of the modern era isn’t a lack of information. It’s quite literally the opposite. We’re drowning in data that can be hard to structure and interpret. And that’s where Palantir steps in. It makes big data digestible and usable for decision-making.
None of this is likely to change any time soon, and Palantir remains the top dog in this space.
But after such an epic run, what should you do? Do you take your profits on this surging tech stock and look for the next opportunity, or do you keep riding this trend as far as it goes?
Let’s go through a few scenarios and discuss the pros and cons of each.
Don’t get greedy
There’s an old maxim on Wall Street: Bulls make money, bears make money, but pigs get slaughtered. Having a disproportionate share of your portfolio in any single stock — even a revolutionary one like Palantir — is risky.
A free-market economy is naturally disruptive, and this is even more true in the tech sector. Today’s cutting-edge leader is tomorrow’s tech dinosaur.
International Business Machines (IBM), Intel (INTC), Cisco Systems (CSCO), Dell Technologies (DELL) … All of these companies were major innovators and indispensable to the tech economies of their day. And they all traded at massive premiums to the broader market. None maintain the same relevance today, and not a single one of these tech stocks warrants a high earnings or sales multiple.
Palantir, meanwhile, trades for 588 times earnings and 130 times sales. Those numbers are so high that they look like typos. To put them in perspective, the S&P 500 is expensive by historical standards and yet trades at a price-to-earnings (P/E) ratio of “only” 31. Its price-to-sales ratio is 3.4.
A company enjoying Palantir’s growth rates should trade at a premium valuation, of course. But there’s premium … and then there’s delusion. This would seem to fall into the latter category.
Selling your Palantir position, or at least trimming little by little, could be smart risk management.
There are two downsides to selling, of course. The first is that you miss out on additional upside if the stock continues rising. The second is the potential tax hit.
Assuming a cost basis of close to nothing, a $1 million profit in Palantir would mean paying something in the ballpark of $200,000 in capital gains taxes.
This brings us to a second option.
Hold on to PLTR stock for dear life
You’ve done fantastically well by simply holding on to your Palantir position this long. The path of least resistance — and the least exposure to capital gains taxes — is just to keep holding.
There are legitimate reasons you might want to simply hold on, apart from tax avoidance.
Palantir is the leader in AI analytics. Its earnings per share nearly doubled in 2024 and are expected to grow by 56% this year and 33% next year. Why wouldn’t you want to maintain outsize exposure to this successful stock?
Any trader will tell you that the secret to really making money in the market is to cut your losers early and let your winners run.
That’s legitimate. But you need to have some risk management in place for when the AI bubble bursts.
One option could be to use a series of stop losses. You could instruct your broker to sell off, say, 20% of your position at a certain pain point, such as a 10% to 15% decline in the share price. You could have a second sell order in place to unload another 20% of your position if the share price drops even further.
This doesn’t eliminate your tax liability, of course. You’d still be on the hook for capital gains taxes on any shares you sold for a profit. But you’d potentially be spreading out the gains over a couple of years.
If things got really bad — such as in a repeat of the 2000-2002 tech bust — you’d be better off paying the taxes rather than watching years of gains go down the tube.
What other options do I have?
You have other options.
If you regularly give to your church or a favorite charity, consider donating appreciated stock instead of cash. Because most nonprofits are tax-exempt, they can sell the stock without paying capital-gains taxes — and you still receive a charitable deduction for the full fair-market value of the gift.
If you’re willing to get a little creative, there are also more sophisticated ways to diversify a concentrated portfolio without triggering a large tax bill. Firms such as AQR Capital Management, Nuveen and other specialized managers offer leveraged long/short strategies designed to intentionally realize losses that can offset existing capital gains.
In broad terms, these managers run aggressive long/short portfolios — buying stocks expected to rise and shorting those likely to fall. Naturally, there will be both winners and losers, but the manager selectively realizes the losing positions. The realized losses then provide tax offsets, allowing you to gradually unwind a large position over several years without being hit with a single, massive tax bill.
Of course, this doesn’t eliminate taxes. It merely defers them. That’s often acceptable, especially if your long-term goal is to leave the portfolio to your heirs, who would receive a stepped-up cost basis upon your death. In that case, those deferred gains could effectively disappear altogether.
Because these strategies involve leverage and short selling, they carry additional risks and complexities. It’s essential to consult a qualified tax or investment professional before proceeding.
Finally, keep perspective: having a large, appreciated stock position is a high-quality problem. It can create tax challenges, yes. But having taxes to pay at least means that you made money.
