Palantir drops for a second day as cult stock loses momentum

Buyers continued to dump Palantir shares on Thursday, escalating issues that the most recent scorching decide amongst retail merchants may very well be really fizzling out.

Shares of the mysterious know-how and protection inventory retreated greater than 5% on Thursday, regaining some floor in afternoon buying and selling. Nonetheless, that builds on Wednesday’s slide of round 10%, which got here after shares touched an all-time excessive earlier within the day and marked the inventory’s worst session since Could.

Wednesday’s preliminary decline got here as traders keyed in on the CEO’s new inventory sale plan and feedback from Protection Secretary Pete Hegseth reported by The Washington Publish on plans to slash protection budgets.

Now, the continued downturn raises alarm of a preferred inventory amongst retail traders displaying indicators of really fizzling out. Shares had run up amid investor pleasure round synthetic intelligence, making Palantir the most effective performer inside the S&P 500 final 12 months.

Palantir has been one of many most-bought securities amongst on a regular basis traders, information reveals. The corporate seeks out these merchants, with executives resembling CEO Alex Karp talking on to them on earnings calls and in video addresses.

“The exercise in Palantir is dominated by retail traders,” mentioned Gil Luria, head of know-how analysis at D.A. Davidson. “The corporate embraces that and caters to these traders as a lot or greater than every other firm.”

Vanda Analysis discovered the inventory has trailed simply Nvidia, Tesla and the SPDR S&P 500 ETF Belief (SPY) in internet inflows from retail traders, in accordance with 2025 information that runs by way of early February. Palantir was additionally one of many most-bought shares by particular person merchants over the previous week, per information from JPMorgan launched Wednesday.

Palantir has change into a kind of cult favourite among the many retail crowd in current months. The inventory shot up greater than 60% in November alone as traders evaluated which firms would profit from President Donald Trump’s return to the White Home.

Layered on high of that’s the truth that Peter Thiel, co-founder of PayPal with Elon Musk, has chaired Palantir’s board for greater than 20 years. Musk is main the so-called Division of Authorities Effectivity’s efforts to chop authorities spending, and there’s hypothesis he may even use Palantir’s know-how to assist him do it.

The corporate’s valuation has given some market individuals cause for pause, as its 198 ahead price-to-earnings a number of far exceeds the S&P 500’s at 22. However sustained devotion from retail traders can truly assist justify its lofty valuation, in accordance with D.A. Davidson’s Luria.

“Palantir is buying and selling at an unprecedented premium to different software program firms,” Luria mentioned. “The reason being that they’ve this very loyal retail investor help.”

In different phrases, Palantir’s valuation makes it a “live-by-the-gun, die-by-the-gun” inventory, Ritholtz Wealth Administration CEO Josh Brown mentioned Thursday on CNBC’s “Halftime Report.”

Two information gadgets appeared to catalyze the preliminary pullback on Wednesday.

Hegseth reportedly advised Pentagon officers to arrange to slash protection budgets by 8% yearly over the following 5 years, a transfer that may fear traders in regards to the state of offers between the federal government and contractors resembling Palantir. Nevertheless, Palantir executives beforehand mentioned they’re optimistic about members of DOGE seeing worth within the firm’s contributions.

Palantir additionally disclosed in a regulatory submitting Tuesday evening that Karp can promote 10 million shares of the corporate’s inventory over the following six months. His eccentric persona has drawn comparisons to Tesla‘s Musk and is taken into account to be serving to to drive consideration and curiosity amongst retail traders.

With these declines, the inventory is down greater than 10% this week. Nonetheless, shares are up greater than 40% in 2025 after skyrocketing round 340% within the prior 12 months.

Whereas mom-and-pop traders have rushed into the inventory, Wall Avenue is not as on board. The typical analyst polled by LSEG has a maintain ranking, with a worth goal implying shares ought to drop from right here.

A part of this disconnect between Most important Avenue and Wall Avenue stems from the truth that on a regular basis traders do not absolutely perceive that “a very good product does not essentially imply it is a good firm, and a very good firm does not essentially imply it is a good funding,” mentioned Christopher Schwarz, a finance professor on the College of California Irvine who research retail dealer conduct.

Schwarz identified that the inventory is buying and selling at round 80 occasions its gross sales, including that no firm of any measurement can be thought-about a sensible funding at that fee.

“It is simply loopy costly — and folks simply do not perceive that there is no manner they will generate income on the inventory over the long run,” Schwarz mentioned. “The extra it goes up now, the extra it will crash sooner or later.”