Why Did Palantir Stock Drop Today?

Key Points

• President Trump said yesterday evening that "fairly substantial" tariffs would soon be levied on semiconductors.

• Another weak jobs report also spooked investors.

• Palantir's sky-high valuation continues to weigh on its stock.

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Shares of Palantir Technologies (NASDAQ: PLTR) fell today, finishing down 2%, but fell as much as 5.2% earlier in the day. The drop came as the S&P 500 (SNPINDEX: ^GSPC) lost 0.3% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was flat.

The artificial intelligence (AI) powerhouse saw shares slide after news that semiconductor tariffs could soon hit chipmakers, sparking fears that margins could be impacted for companies that rely on inference like Palantir.

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Trump says chip levies are coming

At a dinner last night with Silicon Valley CEOs, President Donald Trump said that companies that do not shift production to the U.S. will soon face a "fairly substantial" tariff on the chips they sell into the U.S. Trump did, however, indicate there would be exceptions, though the details are unclear.

While this doesn't affect Palantir directly, it could lead to the cost of inference rising, which investors seemed to believe could impact Palantir's margins.

Image source: Getty Images.

Additionally, a weak jobs report further raises questions about the health of the broader economy. While this can spur interest rate cuts, which in turn tend to lift equity prices, it could indicate that a recession is approaching, which would likely impact Palantir's sales.

Palantir's valuation weighs on the stock

I don't think that chip tariffs will have a sizable impact on inference costs, and even if it does, Palantir would be minimally affected. However, the jobs data is concerning. Palantir's incredible valuation means that the company cannot afford to have anything less than stellar quarter after stellar quarter. Even if the economy is healthy, I don't believe the company can deliver what its stock price demands: perfection.

Therefore, I would stay away from Palantir stock at this price.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.