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

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Stocks for Beginners

This Stellar Canadian Stock Is Up 497% This Past Year and There’s More Growth Ahead

This under-the-radar Canadian stock has surged nearly 500% in 12 months – and its growth story may just be getting…

Read more »

Illustration of data, cloud computing and microchips
Tech Stocks

Opinion: This Is the Only TSX Growth Stock to Own for the Next 3 Years

Alithya Group is quietly building one of Canada's most compelling IT growth stories. Here's why this TSX tech stock deserves…

Read more »

semiconductor manufacturing
Tech Stocks

Want Global Growth Without U.S. Stocks? Start With These 2 Names

If you want global growth without adding more U.S. exposure, ASML and SAP offer two very different but powerful ways…

Read more »

crisis concept, falling stairs
Tech Stocks

Market Crash: 2 Stocks I’d Buy Without Hesitation

Markets in North America are declining. Here's are two high-end stocks that you can use to turn declines in profits…

Read more »

The RRSP (Canadian Registered Retirement Savings Plan) is a smart way to save and invest for the future
Tech Stocks

Your RRSP Balance Doesn’t Matter as Much as These 3 Things in Retirement

Discover the truth about RRSP balances and their impact on retirement income. Learn when RRSP savings truly matter.

Read more »

AI concept person in profile
Dividend Stocks

1 Magnificent Canadian Tech Stock Down 35% to Buy and Hold for Decades

Enghouse is a profitable Canadian software company that looks cheaper now, even as it keeps generating cash.

Read more »

some REITs give investors exposure to commercial real estate
Tech Stocks

1 Perfect Canadian Stock Down 17% to Buy and Hold Right Away

This TSX compounder is down from its highs, but the business is still growing and buying more growth.

Read more »

workers walk through an office building
Dividend Stocks

Here’s the Average TFSA and RRSP at Age 45

Learn why a TFSA is crucial for Canadians planning for retirement. Find out how it compares to an RRSP for…

Read more »