Palantir Technologies (NYSE: PLTR) shares dropped in early Friday trading, as concerns over the pace of AI investment weighed on the stock. The decline was fueled by CoreWeave’s shaky IPO and a cautious note from Goldman Sachs, which raised questions about the sustainability of Palantir’s core technology developments.
The Denver-based AI and data analytics company, founded by Peter Thiel and Joe Lonsdale, has been a standout performer in the artificial intelligence sector. Palantir’s Artificial Intelligence Platform (AIP) allows clients to integrate and streamline disparate data into cohesive models that they can train and deploy for real-world applications. Its ontology framework also helps commercial clients represent and connect real-world entities, data, and processes, enhancing their operational efficiency.
Strong Q4 Results but Valuation Concerns Linger
Last month, Palantir reported better-than-expected fourth-quarter earnings, with profits of 14 cents per share, beating Wall Street estimates. The company’s revenue surged 36% year-over-year to $827.5 million, driven by increasing demand for its AI-powered commercial products.
Palantir’s 2025 revenue forecast was also upbeat, with the company projecting sales of around $3.75 billion, surpassing the LSEG consensus estimate. The commercial segment is expected to see 54% revenue growth from 2024, reaching approximately $1.08 billion.
Despite the positive financials, Palantir’s stock is under pressure. The company’s valuation has soared to 477 times forward earnings, significantly higher than Nvidia’s 38x multiple, raising concerns about its overstretched valuation.
CoreWeave IPO and Goldman Sachs Warning
The recent struggles surrounding CoreWeave’s IPO have cast a shadow over the broader AI investment landscape. CoreWeave, a cloud infrastructure provider, has faced a lackluster reception from investors, fueling doubts about the sustainability of the current AI spending spree.
Adding to the downward pressure, Goldman Sachs issued a note questioning Palantir’s technology moat, warning that the company’s reliance on government contracts could limit its commercial growth potential. The investment bank also flagged the high valuation as a potential risk, noting that Palantir’s stock price could face volatility if AI enthusiasm cools.
Stock Performance and Outlook
Palantir’s stock has surged 143% over the past six months, thanks to the AI boom. It is still up 20% for the year, despite falling 27% from its mid-February peak. Over the past five years, the stock has delivered an eight-fold return, attracting both growth and momentum investors.
However, the recent pullback signals potential caution ahead. With the AI sector facing scrutiny over sky-high valuations, Palantir’s premium pricing could make it vulnerable to further corrections.
The Bottom Line
Palantir Technologies remains a formidable player in the AI space, with strong revenue growth and increasing commercial adoption. However, its lofty valuation and dependence on government contracts raise concerns about the stock’s sustainability.
The CoreWeave IPO struggles and Goldman Sachs’ warning add further uncertainty, suggesting that investors may be growing more selective about AI-related stocks. While Palantir’s long-term growth potential remains intact, short-term volatility could persist as the AI investment landscape evolves.
