Should You Buy the Dip in Palantir Stock?

Palantir Technologies (NASDAQ: PLTR) may be the biggest surprise of the artificial intelligence (AI) revolution so far. What was once viewed as a defense contractor susceptible to lumpy revenue streams from public sector deals has now become one of the preeminent enterprise software players in the AI era.

The company's Artificial Intelligence Platform (AIP) is used in countless mission-critical use cases -- deployed everywhere from banks to hospitals and even the battlefield. Over the last three years, Palantir stock has gone parabolic -- rising nearly 2,300% as of this writing (Jan. 22).

However, 2026 has gotten off to a rocky start. With shares down 7% so far this year and roughly 15% over the last month, is now a good time to buy the dip in Palantir stock?

Image source: Getty Images.

The stock market is fragile right now

Considering Palantir hasn't reported earnings for the fourth quarter yet, I don't think the ongoing sell-off can be attributed to anything specifically related to the company. Both the S&P 500 and the Nasdaq-100, are breakeven on the year.

Against this backdrop, I think growth stocks are reacting sensitively to broader macroeconomic conditions. Below, I've summarized some factors that are contributing a sense of uncertainty to the stock market right now:

• Geopolitics: For the last couple of years, instability across Eastern Europe and the Middle East has added volatility to the market. While both situations remain fluid, the Middle East has potentially become more complicated given some recent turbulence in Iran. Additionally, President Donald Trump's tariff negotiations with the European Union, as well as some of the rhetoric surrounding diplomacy in the Arctic, are also having an impact on the market.
• Trump boom or bust: GDP is on the rise and consumer spending is proving resilient, despite lingering inflation. However, when you sprinkle in that unemployment remains elevated compared to historical levels, the overall strength of the U.S. economy becomes harder to gauge.
• Federal Reserve: Given the current macroeconomic picture, I think it's a coin toss whether or not the Federal Reserve will reduce interest rates in 2026. Generally speaking, changes in monetary policy can materially sway the capital markets.
• AI bubble: Fears that the AI trade is becoming a bubble have caused some investors to trim positions in volatile growth stocks and take gains off the table -- fueling downward pressure on names such as Palantir.

Should you buy Palantir stock right now?

Palantir is one of the most polarizing stocks on Wall Street. Among the 26 analysts who cover the stock, 16 rate the stock a hold while only five have a buy rating.

PLTR PS Ratio data by YCharts

Nevertheless, analysts are generally calling for meaningful gains. The average price target for Palantir is $190, implying 14% upside from current levels. In particular, Bank of America, Morgan Stanley, Citigroup, Piper Sandler, and Wedbush Securities each have a price target of at least $200.

While Palantir stock is not a bargain, its price-to-sales (P/S) ratio is at its lowest level in about six months.

I think a prudent strategy is to employ dollar-cost averaging over a long-term horizon. Now could be a time to consider a small buy, with the plan to hold on to your shares for the long run and supplement your position with further purchases so long as your conviction remains high.

Citigroup is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.