Is Palantir’s recent valuation slide an opportunity to invest in one of the market’s strongest AI players?
Palantir (PLTR -2.92%) stock is getting hit with another substantial round of sell-offs Wednesday on the heels of a big valuation pullback in yesterday’s trading. The artificial intelligence (AI) leader’s share price was down 7% as of 11:15 a.m. ET and had been down as much as 9.8% earlier in trading.
Yesterday’s big sell-off for Palantir stock was partially driven by an earnings report from Home Depot that arrived with news that the retailer would be raising prices on some items due to the higher purchasing costs it’s facing as a result of tariffs. The announcement of pricing increases highlighted the possibility that inflation will soon begin hitting the consumer market. Today, Target‘s earnings and comments about tariff-related pressures seems to be playing a role in Palantir stock’s continued slide.
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In addition to inflation concerns, the Massachusetts Institute of Technology (MIT) recently published a report stating that most companies that have invested in AI have gotten little or no return on their investment. New reads on inflation and the broader macroeconomic backdrop and an uptick in skepticism about artificial intelligence have caused a significant pullback for Palantir recently, but the stock is still up 93% across 2025’s trading.
Is Palantir stock a buy right now?
If overall inflation starts heating up again, the Federal Reserve will have a more difficult path to delivering the interest rate cuts that growth investors have been banking on this year. Trading at roughly 221 times this year’s expected earnings and 78 times expected sales, Palantir has the most growth-dependent valuation of any company in the S&P 500. If the outlook on interest rate cuts takes a turn for the worse and investors start to lose their appetite for AI stocks with heavily forward-looking valuations, the stock could continue to see big sell-offs.
On the other hand, Palantir has a leading position in the AI software market and has been scoring big wins as government customers and companies have ramped up their spending on the category. For investors with a high tolerance for risk and a long time horizon, I think the stock can still deliver wins at current levels — but threats posed by unfavorable inflation and interest rate developments suggest buyers may be able to get a better price by waiting.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, Palantir Technologies, and Target. The Motley Fool has a disclosure policy.
