Palantir Technologies Inc. (NASDAQ: PLTR) has officially entered bear market territory, with shares down over 20% from their recent highs. The drop has rattled retail investors who jumped on the artificial intelligence (AI) hype train, fueling Palantir’s meteoric rise last year. Now, with the stock filling the gap on the downside, investors are questioning how much further it could fall and what’s behind the selloff.
Key Factors Behind Palantir’s Decline
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CEO’s Massive Stock Sale Plan
Palantir disclosed in a recent regulatory filing that CEO Alex Karp plans to sell 10 million shares over the next six months. Insider sales often spark investor concern, signaling potential doubts about future stock performance. While executives regularly offload shares for personal reasons, the timing—amid a steep decline—has added fuel to the selloff. -
Defense Budget Cuts Threaten Government Contracts
Reports indicate that Defense Secretary Pete Hegseth is pushing for an 8% annual reduction in U.S. military spending over the next five years. As a major government contractor, Palantir relies heavily on defense-related contracts, making these potential cuts a significant risk to its long-term revenue projections. -
Valuation Concerns Continue to Grow
Despite its pullback, Palantir still trades at an eye-watering 198x forward earnings, far above the S&P 500’s multiple of 22x. Analysts argue that the stock’s valuation remains disconnected from fundamentals, making it vulnerable to further downside. University of California Irvine finance professor Christopher Schwarz called Palantir’s valuation “crazy expensive,” warning that stocks trading at 80 times sales rarely sustain long-term gains. -
Retail Traders Losing Grip on the Stock
Palantir has been a retail investor favorite, ranking among the most-bought stocks alongside Nvidia (NASDAQ: NVDA) and Tesla (NASDAQ: TSLA). However, as enthusiasm wanes and profit-taking accelerates, the lack of institutional support leaves Palantir highly susceptible to large swings. Data from Vanda Research shows that retail inflows into the stock have slowed in recent weeks.
How Low Could Palantir Go?
With Wall Street analysts maintaining a “Hold” rating and price targets suggesting more room to fall, Palantir’s downward momentum may not be over. The stock is now testing key technical levels, and further declines could push it toward even lower support zones.
As the AI-driven rally loses steam, investors are closely watching for signs of stabilization—or further downside. Will retail traders step in again, or is this just the beginning of a deeper correction?
