Palantir Stock Falls 9% as Decline Stretches to Five Days
Palantir Stock, the once high-flying artificial intelligence darling, fell sharply again Tuesday, losing more than 9 percent, marking the fifth straight trading day of declines. That adds up to a total drop of about 15 percent since its record high just a week earlier.
Why is this happening?
What’s Fueling the Slump in Palantir Stock
A large part of the sell-off stems from growing worries that the stock is overvalued. Citron Research’s Andrew Left called it “detached from fundamentals,” saying Palantir should be closer to $40 a share based on comparisons to the revenue multiples of OpenAI, even though that level would still make it among the most expensive SaaS stocks ever.
On top, this pullback is part of a broader market rotation. Tech and AI-heavy companies like Nvidia and CoreWeave are also sliding as investors rotate out of hyper-growth names toward cyclical or defensive sectors. Broader indexes, S&P 500 down ~0.6 percent and Nasdaq ~1.5 percent, only softened the impact for Palantir, which led the losses.
Another flashpoint: Palantir posted record volume, $22.25 billion, a 104 percent jump from the prior day, highlighting intense selling pressure.
A Brief Background on Palantir
Palantir Technologies was founded in 2003 by Peter Thiel, Alex Karp, Joe Lonsdale, Stephen Cohen, and Nathan Gettings in the wake of the 9/11 attacks. Their vision: to build software that helps U.S. intelligence and law-enforcement agencies make sense of complex data while respecting civil liberties, transitioning fraud-detection tech from PayPal to national security use. The name Palantir comes from Tolkien’s “seeing stones” in The Lord of the Rings, symbolizing the ability to perceive hidden patterns.
One of Palantir’s early breakthroughs was securing funding from the CIA’s In-Q-Tel, which gave them crucial support to break into government contracts, and hired Alex Karp as CEO, shaping the company’s mission-driven identity.
Palantir offers two flagship platforms:
- Gotham, designed for government and defense, helps agencies analyze sprawling, disparate data sets to uncover threats and insights, used by the CIA, FBI, NSA, and military units.
- Foundry, aimed at commercial clients, enables enterprises to integrate and analyze complex business data, serving clients like Airbus, Morgan Stanley, and healthcare providers.
More recently, Palantir has added Apollo, a deployment platform that runs Gotham and Foundry across cloud, on-premises, and edge environments (like satellites and drones), along with AIP, an AI-powered assistant layered into its platforms.
Over the years, Palantir has drawn controversy for its secretive culture and ethical concerns around privacy, especially due to contracts with ICE (U.S. Immigration and Customs Enforcement) and the Israeli military. Still, it has become a powerhouse in data analytics, fueling operations from anti-terrorism to modern commercial use, and reportedly aiding in locating Osama bin Laden
What Technicals Say About Palantir Stock’s Move
Technically, several warning signs are emerging:
- It has fallen below key price levels, including the breakout zone following its earnings-driven surge
- Analysts highlight its 245× forward P/E ratio, far above peers such as Microsoft (~29×) and Apple (~30×), flagging valuation risk.
These signals suggest selling may remain elevated until sentiment stabilizes.
Market Buzz and Sentiment Around Palantir Stock
Palantir became the worst performer in the S&P 500 on Tuesday, even as many broader sectors held steady. It stands out amid growing skepticism in AI valuations and software licensing models in a changing tech backdrop.
Citron’s bold call stands out, but some analysts see a silver lining: despite this tumble, Palantir is still up over 100 percent year-to-date and remains one of the S&P 500’s best performers. That said, Wall Street’s mood has shifted: of eight analysts, only two say ‘buy’, while the rest say ‘hold,’ citing valuation worries. Both Jefferies and HSBC have echoed caution, saying Palantir may already be “priced for perfection”.
Key Overview at a Glance
What Could Come Next for Palantir Stock
Is it a buying opportunity or a red flag?
Based on historical patterns, a 9 percent drop often leads to short-term gains. Backtests show an average 3-day return of +3 percent, 10-day return of +7 percent, and 30-day return of nearly +25 percent. It’s important to note the “bounce” potential, though it isn’t guaranteed.
But risks remain. Many of Palantir’s contracts depend on government spending in defense or intelligence, and any shifts in policy or spending could weigh heavily on revenue projections.
Why It Resonates with Investors, And Why It’s Volatile
The company’s unique blend of deep government ties, AI capabilities, and expanding commercial reach made it a favorite on Wall Street. It became one of the best-performing S&P 500 stocks, surging on its AI story and defense credentials. Yet these very strengths now feed investor caution. Its stock is seen as richly valued, and tied to macro trends in AI love-fests and tech rotations.
Plunging nearly 9 percent recently, its five-day slide shows how sentiment can shift when fundamentals don’t keep pace with hype. Some worry the company’s high P/E and reliance on government contracts may not justify its lofty stock price, especially as AI valuations face broader scrutiny.
Final Thoughts on Palantir Stock
Palantir Stock is a reminder of how fast investor sentiment can swing. Stark gains fueled by AI optimism and record earnings can quickly come undone when valuation concerns and market rotations collide.
Will the stock rebound once AI sentiment stabilizes or risk-aversion fades? It may, especially given its YTD strength and government partnership base. But whether it’s a comeback or a deeper correction depends on fresh catalysts: earnings, AI results, and macro-tech sentiment. Investors should weigh the bounce potential versus fundamental risks and decide based on their own time horizon and risk tolerance.
FAQ’S
Palantir stock is falling mainly due to valuation concerns, heavy selling pressure, and broader market rotation away from AI and high-growth stocks.
The Rule of 40 is a metric for SaaS companies, combining revenue growth and profit margins. Palantir has been praised for exceeding the Rule of 40, showing strong financial efficiency.
Analyst sentiment is mixed. Most recommend a hold due to high valuations, while a minority suggest buying on dips if investors believe in Palantir’s long-term AI potential.
No, Warren Buffett does not own Palantir stock. Berkshire Hathaway has never disclosed a position in Palantir.
Yes, Palantir does have short interest, especially after its sharp rally. Traders are betting against its elevated valuation, but short interest remains moderate compared to other tech stocks.
Yes, Palantir is widely considered an AI stock because its platforms, like Foundry and AIP, leverage artificial intelligence for data analytics, defense, and enterprise decision-making.
Palantir fell more than 9 percent in the latest trading session, marking its fifth straight day of decline.
Palantir saw record trading volume of $22.25 billion, which was a 104 percent increase from the previous day, signaling intense selling pressure.
Disclaimer
This is for information only, not financial advice. Always do your research.