Palantir Stock Is Up 150% in 2025. History Says This Will Happen Next.

Palantir Technologies (NASDAQ: PLTR) is a cornerstone of the artificial intelligence trade, especially among retail investors. The stock has added 150% in 2025, and most Wall Street analysts expect more gains in the coming months. Palantir's median target price of $200 per share implies 6% upside from its current share price of $188.

However, while Palantir's business is firing on all cylinders, history says the stock is likely to crash at some point in the future. Here are the important details.

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Palantir is a leader in AI/ML platforms and AI decisioning software

Palantir helps organizations manage and make sense of complex data. Its analytics software products (Gotham and Foundry) integrate information into an ontology, a decision-making framework powered by machine learning (ML) models that become increasingly proficient at recommending actions as the system captures more data.

That ontology-based software architecture differentiates Palantir from other data analytics platforms. But the company is truly formidable because it has developed an adjacent artificial intelligence platform (AIP) that lets developers build large language models into workflows and applications. In other words, AIP lets users engage data and automate business processes with natural language.

Chief Revenue Officer Ryan Taylor says Palantir is unique in its ability to move enterprise AI projects from prototype to production. That is partly because its software products revolve around a decisioning framework rather than simply focusing on data, and partly because its engineers work directly with clients to build custom solutions.

Of course, whether or not Palantir's products are truly the best at operationalizing AI is a matter of opinion, but the company has received plenty of praise for industry experts. Forrester Research has ranked Palantir as a leader in AI/ML platforms and AI decisioning platforms, and the International Data Corporation (IDC) has recognized its leadership in decision intelligence software.

Looking ahead, Palantir sits in front of a massive opportunity. The AI/ML platform market is forecast to expand at 38% annually through 2033, according to Grand View Research. And Palantir's revenue could grow even faster if it maintains its reputation for cutting-edge data analytics and decisioning tools. Nevertheless, there is one major flaw in the investment thesis: Palantir's absurdly rich valuation hints at a major crash on the horizon.

History says Palantir stock could fall at least 65% in the future

Palantir is an excellent company. Revenue increased 63% in the third quarter, the ninth straight acceleration, and non-GAAP net income climbed 110% to $0.21 per diluted share. However, Warren Buffett once warned, "A too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments."

Palantir currently trades at 115 times sales, making it the most expensive stock in the S&P 500 by a wide margin. AppLovin is second at 44 times sales. That means Palantir would still be the most expensive stock in the index even if its share price dropped 60%. That is simply unsustainable.

Indeed, I reviewed 70+ software stocks and found only seven others that achieved a price-to-sales (PS) ratio above 100 during the last 20 years. All seven stocks eventually crashed, falling at least 65% after reaching their peak valuation. The average decline was 79%, as detailed below:

• Strategy peaked at 242 times sales in July 2025 and dropped 65% by December 2025.
• Snowflake peaked at 222 times sales in December 2020 and dropped 73% by September 2024.
• SentinelOne peaked at 148 times sales in September 2021 and dropped 83% by June 2023.
• Zoom Communications peaked at 123 times sales in October 2020 and dropped 90% by June 2024.
• Cloudflare peaked at 114 times sales in November 2021 and dropped 83% by November 2022.
• SoundHound AI peaked at 111 times sales in December 2024 and dropped 70% by April 2025.
• Bill Holdings peaked at 103 times sales in September 2021 and dropped 89% by April 2025.

There is more bad news. Cloudflare is the only stock listed above to reach a new high after achieving its peak PS multiple. The other six are still down at least 44% from their record highs, and three are still down at least 80%.

Here's the bottom line: History says Palantir stock will eventually fall 79% from its peak valuation. At present, its peak valuation happened in August 2025, when the stock traded at 137 times sales and $187 per share. From that point, a 79% drawdown implies a future price of $39 per share.

Of course, past performance is never a guarantee of future results. Palantir may fall less sharply than other software stocks that have peaked above 100 times sales. But the risk-reward profile is undoubtedly skewed toward risk. So, investors should either avoid the stock or keep their positions very small. I say that as a shareholder myself.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Bill Holdings, Cloudflare, Palantir Technologies, SentinelOne, Snowflake, SoundHound AI, and Zoom Communications. The Motley Fool has a disclosure policy.