Israel Englander's Strategic Q3 Shift: From Palantir to Tesla's AI Future

The third quarter brought a striking portfolio adjustment from one of Wall Street’s most successful investors. Israel Englander, the founder and CEO of Millennium Management, made a notable decision that reveals much about where sophisticated money sees opportunity in today’s market. The hedge fund simultaneously reduced its Palantir stake by 91% while quadrupling its Tesla position—a move that demands closer examination.

Millennium Management isn’t just any fund. It has outperformed the S&P 500 by approximately 39 percentage points over the past three years and ranks as the third most successful hedge fund in history by net gains, according to LCH Investments. When Israel Englander and his team make moves, they warrant attention from thoughtful investors seeking signals about market direction and valuation.

Who’s Making These Moves: Understanding Israel Englander’s Investment Philosophy

Israel Englander built Millennium Management into a powerhouse through disciplined stock picking and rigorous risk management. The fund’s track record suggests the team doesn’t make emotional decisions—every portfolio adjustment reflects careful analysis of risk-reward dynamics.

In Q3 specifically, Israel Englander’s fund executed two contrasting trades that tell a story about valuation discipline and forward-looking conviction. Millennium sold 4.5 million shares of Palantir Technologies (reducing exposure by 91%), while simultaneously buying 311,000 shares of Tesla. The Tesla position now represents a meaningful stake, and the timing is particularly interesting given the diverging narratives between these two companies.

The Exit: Why Israel Englander Abandoned the AI Darling

Palantir has enjoyed substantial momentum, crushing the S&P 500 last year with strong financial performance. The company reported a 45% increase in customer count during Q3, with average spend per existing customer rising 34%. Revenue jumped 63% to $1.1 billion, marking the ninth consecutive quarter of acceleration. Non-GAAP net income surged 110% to $0.21 per diluted share.

Forrester Research has praised Palantir as a leader in AI platforms and decisioning software, with analysts calling it “quietly becoming one of the largest players in this market.” The company’s software excels at operationalizing AI—moving projects from prototype to production stage—a genuine competitive advantage.

Yet Israel Englander saw something that warranted a dramatic reduction. The answer lies in valuation mathematics. Palantir trades at 110 times sales, making it the most expensive stock in the S&P 500 by an enormous margin. The second most expensive stock, AppLovin, trades at just 38 times sales. This means Palantir could fall 65% and still represent the index’s most expensive name.

Historically, very few software companies have sustained valuations above 100 times sales indefinitely. Israel Englander’s decision to trim the position reflects disciplined valuation discipline—acknowledging Palantir’s merits while recognizing that price had disconnected from fundamental value.

The Conviction Play: Tesla’s Long-Term AI Potential

While Tesla’s electric vehicle business has faced headwinds—losing about 5 percentage points of market share over the past year, with Chinese competitor BYD now leading in global EV sales—Israel Englander’s increased position suggests he sees Tesla’s future differently.

The investment thesis increasingly centers on “physical AI”: autonomous vehicles and humanoid robots. Tesla’s robotaxi strategy carries distinct advantages. Unlike Alphabet’s Waymo, which has launched commercial services in numerous cities, Tesla employs a camera-only approach that requires no lidar or radar. This keeps costs substantially lower and doesn’t depend on high-definition city mapping for deployment.

Tesla also owns a significant advantage in scale. With approximately 8 million vehicles already on the road, the company can crowdsource real-world driving data by allowing owners to participate in its robotaxi network. This network effect could accelerate autonomous capabilities dramatically.

Beyond robotaxis, Tesla is developing Optimus, an autonomous humanoid robot aimed at manufacturing, healthcare, and other labor-intensive sectors. Management suggests Optimus could represent an enormous long-term opportunity. The robotaxi market is projected to grow at 74% annually through 2030, while the humanoid robot market is expected to expand at 54% annually through 2035.

The Valuation Calculus: Why Israel Englander’s Contrarian Move Makes Sense

Israel Englander’s portfolio reshuffling reflects clear valuation logic: exiting an AI leader trading at unsustainable multiples while building exposure to a company with meaningful long-term optionality despite near-term headwinds.

This isn’t a bet that Tesla will dominate electric cars tomorrow. It’s a bet that physical AI represents a multibillion-dollar market opportunity and that Tesla possesses structural advantages in capturing that value. For risk-tolerant investors with a five-year-plus time horizon, the trade arguably merits consideration.

The moves highlight why Israel Englander’s fund consistently beats the market: the discipline to exit winners when valuations become irrational, and the conviction to build positions in companies with genuine long-term catalysts even when the narrative remains unfavorable short-term.