Palantir Stock Plunge: What History Tells Us

Palantir Technologies (NASDAQ: PLTR) has been on a wild ride in recent months. The stock reached an all-time high of approximately $125 per share on February 18, 2025, driven by a combination of factors including its irreplaceable AI-driven platforms, Gotham and Foundry, and the hype surrounding generative AI and the election of Donald Trump. However, the stock has since tumbled 30% from its peak, raising the question: what does history tell us about where Palantir's stock is headed next?



The first thing to note is that Palantir's valuation at its peak was extraordinarily high. The company's forward price-to-sales (P/S) multiple reached 61, which is an unprecedented valuation ratio. This means that the current market capitalization of Palantir is 61 times its forecast sales over the next four quarters. This valuation is considered absurdly expensive by many analysts.

Historically, other software stocks that have reached similar high valuations have experienced significant declines. For instance, SoundHound AI traded at 63 times forward sales in May 2022 and declined 96% by January 2023. Snowflake traded at 60 times forward sales in November 2021 and declined 73% by September 2024. Serve Robotics traded at 59 times forward sales in December 2024 and declined 62% by February 2025. All three of these companies are still down at least 55% from their record highs.

The average peak-to-trough decline for these three stocks was 77%. If Palantir were to experience a similar decline, its stock price could fall below $29 per share. This historical data suggests that Palantir's stock still has a long way to fall, given that it has already declined 32% from its record high in the last seven trading days.



Another factor to consider is the current market environment. Disappointing economic data and concerns about tariffs set to take effect in early March have rattled Wall Street, leading to a drawdown in the broader market. This has also affected Palantir, with history suggesting that the stock has further to fall.

Furthermore, the Trump administration's push to reduce U.S. federal spending and slash the Pentagon's budget by 8% annually for the next five years could negatively impact Palantir's revenue, as U.S. government clients made up around 42% of its revenue in 2024. Additionally, the winding down of conflicts like the one in Ukraine could cut more of the company's vital revenue stream.

In conclusion, while Palantir's stock has fallen 30% from its high, history suggests that there is still a significant risk of a substantial decline in its stock price. Investors should be cautious and consider the potential downside before making any investment decisions.