Palantir stock (PLTR) has been moving sharply in recent weeks. The AI software company climbed to record highs in August. Soon after, it fell quickly and lost about a quarter of its value in just a few trading days. PLTR stock is now about 18% below its peak. Investors are wondering if this is the beginning of a deeper decline or if it is a chance to buy before the next move higher.
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Investors Pull Back From AI Names
The recent drop in Palantir stock did not come from one piece of news. Instead, it was part of a broader shift in the market. Money rotated out of high-flying AI stocks after a big run-up earlier this year. At the same time, smaller-cap names caught investor attention as traders positioned for potential interest rate cuts from the Federal Reserve in September.
Palantir was not spared. The company’s huge run to $190 a share made it one of the strongest performers in the S&P 500 (SPX) this year. But when traders decided to trim AI holdings, Palantir became a natural target. The fall happened fast, showing how quickly sentiment can swing in this crowded sector.
Insider Selling Sparks Worry
Another reason investors pulled back was insider selling. CEO Alex Karp sold some of his own stock to cover tax obligations. While the sale was not unusual, it rattled some traders who worried that executives might see the stock as overheated.
When leaders sell during periods of volatility, it can create a snowball effect. Other investors often follow suit, even if the selling has nothing to do with the company’s long-term outlook. That may have amplified the pullback Palantir saw in recent weeks.
Sam Altman Adds to Doubts
Comments from OpenAI CEO Sam Altman also added pressure. At a dinner with reporters, Altman said the AI industry may be in a bubble. He stressed that AI is a powerful technology with lasting potential, but he warned that excitement might be too high in the near term.
For traders already nervous about Palantir’s lofty valuation, those words stung. If the leading voice in AI is hinting at overexcitement, some investors decided it was safer to step aside, at least for now.
Palantir Keeps Delivering Results
Despite the recent stock weakness, Palantir’s business continues to fire on all cylinders. In its latest quarter, the company grew revenue 48% year-over-year and reported an adjusted operating margin of 46%. That easily clears the “Rule of 40,” a benchmark used to measure the health of software companies.
Growth is coming from both commercial and government segments. U.S. commercial revenue surged 93% compared with last year, thanks to its Artificial Intelligence Platform, which makes its software easier for businesses of all sizes to use. On the government side, sales climbed 53%, and Palantir just landed a $10 billion military deal in early August.
Palantir’s Valuation Is Still a Concern
The real challenge for Palantir stock is valuation. Even after its 18% pullback, the company trades at around 90 times forward sales and a forward P/E ratio near 240. Those numbers are sky-high by almost any standard.
If growth continues at a 50% clip, Palantir could eventually grow into this valuation. But any slowdown, or even a shift in sentiment, could send the stock lower very quickly. That is the double-edged sword of being seen as the poster child of the AI boom.
Is Palantir a Good Stock to Buy?
Palantir stock (PLTR) currently carries a Hold rating based on 19 analyst reviews in the past three months. Of those, four analysts recommend a Buy, 13 suggest a Hold, and two rate it a sell.
The average 12-month PLTR price target sits at $154.47, which points to a modest downside of about 1.43% from the latest close.
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