Why Palantir Stock Soared Today
Key Points
Investors sold out of artificial intelligence chip stocks and moved money into AI software stocks today.
Palantir's valuation benefited from the rotation trend.
Palantir stock is still down more than 40% year to date after today's pop, but it ,continues to trade at a growth-dependent valuation.
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Palantir (NASDAQ: PLTR) stock moved higher in Friday's trading. The company's share price rose 5.3% in the daily session amid roughly flat trading for the S&P 500 and a 0.2% drop for the Nasdaq Composite.
While many artificial intelligence (AI) chip stocks are getting hit with pullbacks today, there appears to be some investor rotation into high-profile AI software plays. Even though the stock is bouncing today, it's still down roughly 36% across 2026's trading and 45% from its all-time high.
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Image source: Getty Images.
Investors are rotating out of AI chips into AI software
The chip stock trade has generally been red hot this year, but there have been recent signs that momentum in the category is reversing. Micron posted better-than-expected quarterly results on June 24, but the company's share price has still moved lower in the aftermath. The reaction to Micron's earnings and general concerns that AI chip stocks may be in overvalued territory has spurred an investor rotation into software stocks, and Palantir is benefiting from the trend.
What's next for Palantir?
Despite trading down more than 40% from its all-time high, Palantir is still valued at highly growth-dependent multiples. The company is priced at approximately 77 times this year's expected earnings and 35 times expected sales. The stock could continue to see bullish valuation trends if the rotation out of hardware and into software continues, but its valuation profile also suggests substantial downside risk if the market turns more bearish on the broader AI trade.
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Keith Noonan has positions in Micron Technology. The Motley Fool has positions in and recommends Micron Technology and Palantir Technologies. The Motley Fool has a disclosure policy.
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