Tesla (TSLA) Stock: Billionaire Hedge Fund Manager Dumps Palantir for Tesla Despite EV Sales Slump

TLDR

• Israel Englander’s Millennium Management sold 91% of its Palantir stake (4.5 million shares) in Q3 while quadrupling its Tesla position by adding 311,000 shares.
• Palantir trades at 110 times sales, making it nearly three times more expensive than any other S&P 500 stock and the most overvalued in the index.
• Tesla’s EV deliveries dropped 8.5% in 2025, but the Model Y refresh and phased Juniper rollout heavily impacted first-half sales.
• Tesla’s second-half annualized delivery rate hit 1.83 million vehicles, suggesting a return to growth is possible in 2026.
• Model 3 sales actually increased 17.6% in the first nine months of 2025 in the U.S., indicating the decline was primarily Model Y-related.

Israel Englander made a contrarian bet in the third quarter that raised eyebrows across Wall Street. His hedge fund, Millennium Management, slashed its Palantir position by 91% while quadrupling down on Tesla stock.

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The move seems counterintuitive at first glance. Palantir crushed the market last year while Tesla underperformed. But Englander’s track record speaks for itself—Millennium beat the S&P 500 by roughly 39 percentage points over the past three years.

Millennium sold 4.5 million Palantir shares in Q3, dropping it from a top 10 holding. The fund simultaneously added 311,000 Tesla shares. Tesla has climbed 27,300% since its 2010 IPO, though recent performance has been rocky.

Palantir’s Valuation Problem

Palantir’s AI software business is booming. The company reported 63% revenue growth in Q3, hitting $1.1 billion. Customer count jumped 45% and spending per customer rose 34%.

Forrester Research calls Palantir a leader in AI platforms. Management claims the company excels at moving AI projects from prototype to production. The numbers back up that assertion—non-GAAP net income surged 110% to $0.21 per diluted share.

But here’s the catch. Palantir trades at 110 times sales. That makes it the most expensive stock in the S&P 500 by a wide margin.

The second-priciest stock in the index, AppLovin, trades at just 38 times sales. Palantir’s valuation is nearly three times higher. Few software companies have ever sustained price-to-sales ratios above 100.

The stock could theoretically drop 65% and still hold the title of most expensive in the S&P 500. That’s a precarious position for any investor holding a large stake.

Tesla’s Transformation Play

Tesla’s EV business faces real challenges. The company lost about 5 percentage points of market share over the past year. Chinese automaker BYD now leads global electric car sales.

Full-year 2025 deliveries fell 8.5%. That’s not a pretty picture for the core business. But the investment thesis has shifted dramatically.

The Model Y refresh explains much of the 2025 decline. The midsize SUV accounts for over a quarter of U.S. EV sales. Production shifts and buyer anticipation for the new Juniper model hammered first-half deliveries.

Model 3 sales actually rose 17.6% in the first nine months of 2025 in the U.S. This wasn’t a Tesla-wide problem. It was specifically a Model Y issue.

Second-half annualized deliveries hit 1.83 million vehicles. Wall Street consensus for 2026 sits at 1.75 million. With easier year-over-year comparisons coming and the Juniper now available globally, growth should return.

The Physical AI Bet

Tesla’s future centers on physical artificial intelligence. That means robotaxis and humanoid robots, not just electric cars.

The company’s camera-only approach gives it cost advantages over competitors like Waymo. Tesla doesn’t need expensive lidar or radar sensors. Its software doesn’t require high-definition city maps either.

Tesla has roughly 8 million vehicles on the road. The plan is to let owners add their cars to a crowdsourced robotaxi platform. That’s a massive head start on building a fleet.

CEO Elon Musk believes the Optimus humanoid robot could eventually generate $10 trillion in revenue. He recently claimed “Optimus will be an incredible surgeon.” The robotaxi market is projected to grow 74% annually through 2030.

The humanoid robot market should expand at 54% annually through 2035. Neither business generates material revenue today, making valuation highly speculative.

Musk expects regulatory approvals for unsupervised robotaxis to arrive in 2026. Cybercab production is scheduled to begin in April. European FSD approval in the Netherlands could come in early 2026.

Tesla announced fourth-quarter production and deliveries that disappointed investors. The report capped off a year with declining EV sales. But the Juniper rollout is complete and newer, more affordable Model Y versions are now competing on price.

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