Palantir Shares Tumble Over 9% as Valuation Concerns Mount Despite Record Growth
Tuesday was the fifth day in a row that Palantir Technologies (PLTR) shares lost value, dropping more than 9% to close just below $158.
Quick overview
- Palantir Technologies (PLTR) shares have dropped over 9% for five consecutive days, raising concerns about the company's high valuation despite record profits.
- Short seller Andrew Left has criticized Palantir's stock price, suggesting it should be valued closer to $40, which has contributed to the recent selloff.
- While Palantir recently achieved its first $1 billion revenue quarter, analysts remain skeptical about its valuation, with many recommending a 'hold' on the stock.
- The broader software industry is showing signs of weakness, which could further impact Palantir's stock performance if selling pressure continues.
Tuesday was the fifth day in a row that Palantir Technologies (PLTR) shares lost value, dropping more than 9% to close just below $158. Investors are worried about the company’s high valuation even though it has been making record profits.
The company that makes artificial intelligence software has dropped more than 15% from its all-time highs established only last week. This is a big change for what has been the S&P 500’s best-performing stock in 2025. Even though the stock has dropped recently, it has more than doubled in value this year. This is because there is a lot of demand for the company’s AI Platform and it has won a lot of government contracts.
Short Seller Sounds Alarm on Palantir Shares
The most recent selloff was made worse by comments from well-known short seller Andrew Left of Citron Research, who said in a report that Palantir has become “detached from fundamentals.” Left said that the stock should be worth closer to $40. He compared Palantir’s price-to-revenue ratio to OpenAI’s and said that even at that lower price, the business would still be “among the most expensive software-as-a-service names in history.”
Left’s help comes at a time when the outspoken analyst is facing criminal accusations for securities fraud. He has earned the nickname “The Bounty Hunter of Wall Street” for exposing companies that are worth too much.
Wall Street Divided
Not only short sellers are skeptical; typical Wall Street analysts are also. Visible Alpha asked eight analysts about the stock, and just two said to “buy.” The other six said to “hold” because they were worried that the price had gone up too quickly and too much.
Jefferies analysts praised Palantir’s excellent sales growth after the company’s most recent earnings release, but they also said that the stock’s price is still “disconnected from even optimistic growth scenarios.” HSBC analysts also warned that shares might already be “priced for perfection,” which means they might not be able to achieve investors’ high expectations.
Fundamental Strength Amid Valuation Fears
Even while Palantir is doing better financially than ever, there are still doubts about its value. The company had its first-ever $1 billion revenue quarter earlier this month. This news propelled shares to record highs at first. The company’s profits have gone up a lot because of the continuing AI boom and more government investment, especially because President Donald Trump is pushing for federal agencies to become more contemporary.
Palantir’s remarkable rise has made it one of the top 10 tech businesses in the U.S. and one of the 20 most valuable corporations in the country. Investors, on the other hand, have had to pay a lot for this achievement. The stock’s forward price-to-earnings ratio has shot up past 245 times, which is much higher than the ratios of computer titans like Microsoft and Apple, who trade at about 30 times forward earnings even though they make a lot more money each quarter.
Technical Breakdown Signals Broader Software Weakness
The iShares Expanded Tech-Software industry ETF fell below its 50-day moving average for the first time since February on Tuesday, which was also a sign of weakness in the software industry as a whole. Technical analysts say that Palantir, which is the ETF’s biggest holding, might suffer more pressure if selling continues.
others chart watchers say that the stock could challenge support near the $150 level, which is a psychologically important level. If selling picks up speed, others say that $140 could be a possible downside target. The current drop has filled a gap from August 4, the day before Palantir’s big post-earnings bounce that brought shares up 8% at first.
Palantir (PLTR) Stock: Looking Ahead
Palantir’s core business is still growing at an outstanding rate, but the company now has to figure out how to justify a valuation that has beyond even the most optimistic estimates. As excitement about AI starts to fade and investors become more picky about growth stocks, Palantir will need to show that its high prices are based on long-term competitive advantages and not just market excitement.
In the next several weeks, we’ll probably find out if this retreat is a good indication for a high-growth firm or the start of a bigger price drop as reality catches up with expectations in the AI software market.
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