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 sign flashes global stock data
Tech Stocks

If the TSX Rally Continues, These Are 2 Stocks You’ll Wish You Bought

Two TSX stocks could turn a record-setting market rally into profits from trading activity and jet deliveries.

Read more »

Person holding a smartphone with a stock chart on screen
Tech Stocks

How a $20,000 TFSA Could Grow Into $100,000 by 2030

Aiming to turn $20,000 into $100,000 by 2030 likely requires extreme returns, and one Canadian space stock is positioned for…

Read more »

warehouse worker takes inventory in storage room
Tech Stocks

I’m Doubling Down on This AI Stock Before It Doubles Again

A Canadian AI leader is quietly optimizing over US$200 billion in inventory, and its stock is still well off highs.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Billionaires Are Unloading Amazon and Piling Into This TSX Stock

Get insights into the recent sell-offs of Amazon stock by billionaires and how it impacts the investment landscape after Buffett.

Read more »

woman looks out at horizon
Tech Stocks

This Is the TFSA Balance You’ll Likely Need to Retire Comfortably in Canada

Wondering how much you need in your TFSA to retire well? Here's the target number and how a small-cap stock…

Read more »

Financial analyst reviews numbers and charts on a screen
Dividend Stocks

Dip Buyers Could Win Big: 2 of the Best Canadian Stocks to Buy Now

A 31% drop has made Shopify and Nutrien look cheaper, even as both companies are still putting up strong operating…

Read more »

a person watches a downward arrow crash through the floor
Tech Stocks

1 Magnificent Canadian Tech Stock Down 46% to Buy and Hold Forever

A 46% drop has made Constellation Software far cheaper, even as its cash-flow-driven acquisition machine keeps humming.

Read more »

data center server racks glow with light
Tech Stocks

3 TSX Stocks That Could Turn $30,000 Into $300,000

A $30,000 portfolio split across three Canadian growth stocks could have the ingredients to compound into $300,000 over time.

Read more »