Palantir Stock is Showing a Disturbing Trend That Investors Shouldn't Ignore

Palantir Technologies (NASDAQ: PLTR) has scored a home run for investors as the artificial intelligence (AI) revolution picked up momentum. The company, thanks to its Artificial Intelligence Platform (AIP), allows customers to apply AI to their needs -- demand for the system has been high and has translated into strong revenue growth. And this has powered the stock higher, with shares advancing 2,200% in three years.

So, investors have gotten used to solid earnings reports from Palantir and fantastic stock price performance. And now, with the company's next earnings report set for Feb. 2, all eyes are on Palantir.

What's next for Palantir stock? Before answering that question, let's consider the following: Palantir's stock is showing a disturbing trend that investors shouldn't ignore.

Image source: Getty Images.

Palantir's success story

Before considering this trend, though, first, a quick summary of how and why Palantir has become so successful. Palantir isn't new to the scene -- it's more than 20 years old -- though it launched an initial public offering just a few years ago. In Palantir's early days, it mainly served governments with its software that helped them organize, analyze, and make use of their data.

But today, Palantir boasts thriving government and commercial businesses. In fact, the commercial customer may be seen as the company's potential revenue driver of the future, and this is thanks to AIP. Commercial customers have rushed to get in on this tool that allows them to easily apply AI to their problems -- and generate game-changing solutions. Quarter after quarter, Palantir has spoken of soaring demand for AIP, and the company has expertly balanced growth and profitability.

As mentioned, this has led to gains in the stock price. Now, let's consider the disturbing trend that has emerged in recent quarters. Though Palantir stock has gained more often than it's slipped in the two weeks and the six months following the company's quarterly earnings reports over the past several quarters, here's the disturbing trend: The pace of gains has greatly slowed, as shown in the chart below. (I didn't include the past two quarters since six months haven't yet elapsed since the earnings report dates.)

A focus on valuation

So, what does this mean for investors? This trend suggests that the enormous gains Palantir delivered in the past may indeed be a thing of the past -- at least for now. In recent times, investors have zeroed in on valuations of AI stocks, which have reached high levels, and Palantir's has been a point of focus. Though it's come down in recent times, the stock still is considered to be quite expensive.

This doesn't mean Palantir's positive performance is over. The company continues to deliver earnings growth and encouraging comments regarding demand -- so even if the stock hits some rough patches in the near-term or if gains are muted, it may be well positioned to deliver great returns over the long haul.

Adria Cimino 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.