The artificial intelligence (AI) narrative is entering a new chapter, and it's time for the "Magnificent Seven" stocks to move over. Throughout 2024, investors have been presented with a host of new, emerging players that are working alongside big tech and have proven they are here to compete in the AI realm.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free "

In my eyes, Palantir Technologies (NYSE: PLTR) has become the most interesting case study among smaller technology companies. So far in 2024, shares of Palantir have gained 283% as of this writing, and the company stands as the best-performing stock in the S&P 500 this year.

And yet, as shares of Palantir continue to reach new highs, one notable investor has been dumping the stock in droves. I'm going to outline the moves Cathie Wood of Ark Invest is making, and detail why selling Palantir stock right now actually makes a lot of sense.

One of the more interesting things about Ark Invest is that the firm publishes a breakdown of the stocks it buys and sells each trading day.

Data source: Ark Invest, Cathiesark.com. Table by author.

According to that data, Wood and her team reduced their holdings of Palantir across Ark's various funds by roughly 1.9 million shares between Sept. 11 and Nov. 15.

Shares of Palantir have soared throughout 2024. But between Sept. 11 and Nov. 15 (the period of Ark's selling), Palantir stock gained 89%.

In the chart above, the date of Palantir's third-quarter earnings release is marked with a purple circle with the letter "E" in the center. As you can see, Palantir stock has risen considerably following that blowout Q3 report.

While such gains have been great for Palantir shareholders, the magnitude of these upswings should come with a hard look at the fundamentals. As illustrated in the graph below, Palantir's price-to-sales (P/S) multiple of 60 is the highest among leading software-as-a-service (SaaS) businesses -- and it's not particularly close, either.

I cannot stress this point enough: Palantir is trading at more 60 times sales, not earnings. While Palantir is indeed generating positive net income and free cash flow, both measures are still relatively small right now.