Why Palantir Stock Sank Today
Key Points
Palantir stock sold off today as the market pivoted away from growth-dependent AI stocks.
The U.S. economy added more jobs than expected in May, but that could actually be negative for stocks.
With inflation still coming in hot and jobs growth looking solid, the Federal Reserve may opt to raise interest rates.
- 10 stocks we like better than Palantir Technologies ›
Palantir (NASDAQ: PLTR) stock saw another round of pullbacks in Friday's trading. The artificial intelligence (AI) and data analytics specialist's share price slid 4.3% in the daily session and had been off as much as 5.4% at one point in the session.
The broader market got hit with a strong round of selling pressures today as investors braced for the possibility that the Federal Reserve is on course to raise interest rates this year. The S&P 500 ended the day down 2.6%, and the Nasdaq Composite closed out the session down 4.2%.
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Palantir stock slumped in a brutal day for the Nasdaq
The tech-heavy Nasdaq Composite index registered its biggest single-day pullback since April 2025 today, and there are some complicated catalysts at play. Valuations for AI stocks were already under pressure after the market had a staunchly negative reaction to strong quarterly results from Broadcom, and the latest jobs report from the Bureau of Labor Statistics (BLS) has only served to elevate investors' anxieties.
The BLS's May jobs report actually showed that the U.S. economy added 172,000 nonfarm jobs in May -- beating the forecast from surveyed economists targeting net job additions of 80,000 in the month. While stronger-than-expected jobs growth might intuitively seem like a positive, the report has actually added to anxieties surrounding valuation levels in the market.
Investors are worried about the AI trade
AI stocks have seen strong bullish momentum this year, and semiconductor plays in the category have enjoyed particularly strong valuation gains. With its stock down roughly 24% year to date, Palantir hasn't been a beneficiary of the recent hot streak for AI stocks -- but that doesn't mean that it's immune when pullbacks hit the broader sector.
Even with the recent pullback, the tech-heavy Nasdaq Composite index is still up roughly 32% over the last year. So even though Palantir trades down 35% from its high and has been posting strong business results, investors should understand that its valuation profile sets the stage for volatility if the market adopts a more risk-averse positioning.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom and Palantir Technologies. The Motley Fool has a disclosure policy.
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