Why Palantir Stock Is Falling (Again) Today

Shares of even the most successful companies can crash when valuations get this disconnected from reality.

| More on:
Key Points

This article first appeared on our U.S. website.

Shares of Palantir (NASDAQ: PLTR) are falling once again. The stock is down about 2% as of 2 p.m. Wednesday after having dropped as much as 5% earlier in the day. Palantir stock gave up nearly 8% Tuesday and has been on a downslide since Aug. 12.

The AI-powered company is seeing its share slide as part of a larger sell-off in tech, as concerns over the health of the U.S. economy mount. Given its sky-high valuation, Palantir’s stock is getting hit especially hard.

PLTRCrash

Palantir stock plunges as tech sell-off intensifies

Among the companies that actually take artificial intelligence (AI) and apply it in the real world, Palantir has been a notable standout, delivering massive revenue and earnings growth while rivals like C3.ai and BigBear.ai are still operating deep in the red and seeing their sales stagnate.

That’s led investors to pile into Palantir stock, which has reached an astronomical valuation of nearly 500 times earnings. That’s not a particularly sustainable valuation, and as concerns mount after recent jobs data showed a slowing economy, many investors are rotating out of riskier tech stocks sitting near record highs.

Citron Research takes aim at Palantir’s valuation

Palantir was also the target of a short report from one of the most prominent short sellers on the market, Citron Research, which pointed out that after OpenAI’s latest funding round, it is valued at roughly 17 times its sales. Palantir’s stock carries a price-to-sales (P/S) multiple nearly seven times that of OpenAI — the company at the very heart of the AI boom. Citron believes this is not rational.

I agree. Palantir may be firing on all cylinders, but its stock is disconnected from reality, and until it comes back down to earth, I personally would not invest.

Fool contributor Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends Palantir Technologies. The Motley Fool has a disclosure policy.

More on Tech Stocks

A person's hand cupped open with a hologram of an AI chatbot above saying Hi, can I help you
Tech Stocks

What the TFSA Fine Print Says About Holding U.S. Stocks

The TFSA protects Canadian gains from tax, but U.S. dividend stocks come with a 15% dividend withholding tax twist most…

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

3 Canadian Stocks That Could Thrive Even if the Economy Slows

If the TSX hits a softer patch, these three stocks stand out for durable demand, long-cycle work, or exposure to…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

1 Canadian Stock to Buy Before the Bank of Canada Speaks

BlackBerry is suddenly looking like a real pre-Bank of Canada play, with sticky government and auto customers, plus a turnaround…

Read more »

child looks at variety of flavors at ice cream store
Tech Stocks

What is One of the Best Tech Stocks to Own for the Next Decade?

Constellation Software (TSX:CSU) stock could be one of the best Canadian tech stocks to buy and hold for long term…

Read more »

Woman checking her computer and holding coffee cup
Tech Stocks

Billionaires Are Selling Amazon Stock and Betting on This TSX Stock

Billionaires are trimming Amazon stock and shifting attention to this TSX growth stock that’s gaining momentum.

Read more »

young adult uses credit card to shop online
Tech Stocks

Shopify Just Moved: 2 Canadian Tech Stocks to Buy Next

Shopify’s surge has put Canadian tech back in focus, but OpenText and Lightspeed look like two “next up” ideas with…

Read more »

chip glows with a blue AI
Tech Stocks

2 TSX Stocks That Could Give Your TFSA Returns a Meaningful Boost

Unlock the potential of your TFSA and discover how to maximize growth with strong investments and timely contributions.

Read more »

Abstract technology background image with standing businessman
Tech Stocks

AI Spending Is Poised to Hit US$700 Billion in 2026: 2 Top Stocks to Buy to Capitalize on This Massive Number

These two Canadian stocks are well-positioned for the AI surge ahead.

Read more »