Palantir Surged Again Today -- Is the Artificial Intelligence (AI) Stock a Buy?

Source The Motley Fool

Palantir (NASDAQ: PLTR) stock recorded another day of big gains in Thursday's trading. The company's share price closed out the day up 6.9% amid the backdrop of a 2% gain for the S&P 500 and a 2.7% gain for the Nasdaq Composite. After big gains Tuesday and Wednesday, Palantir stock moved higher again in Thursday's trading as investors reacted to reports suggesting that the U.S. is making negotiations with large trade partners a priority.

Despite comments from Chinese officials suggesting that meaningful discussion with the U.S. on a trade deal is not underway, the Trump administration has said that negotiations are in the works and generally adopted public positioning that suggests the desire to get a deal done. Other reports suggest that the U.S. and India may have reached foundational terms for a bilateral trade deal. With today's gains, Palantir stock is now up 42.5% in 2025. Shares are also still down 13.5% from their high.

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Is now the time to buy Palantir stock?

Conventional valuation approaches likely suggest that Palantir stock is close to untouchable at today's prices. With the company valued at approximately 194 times this year's expected earnings and 97 times expected sales, the software specialist's core valuation metrics could look hard to justify even in the context of very strong performance for the business over the last year. Along those lines, investors without a high tolerance for risk and volatility should probably steer clear of the stock at current levels.

The bull case for Palantir hinges on the company having a stellar long-term growth outlook in the artificial intelligence (AI) services space and having made the right bets on software for operating-system-level integration for AI technologies. To Palantir's credit, its recent wins make it hard to argue against the company's strategy and execution. If you think that Palantir's lead in AI software is driving a paradigm shift on public sector and private sector operations, there are still good reasons to be bullish on the stock right now. But investors should proceed with the understanding that the valuation profile here comes with significant downside risk.

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Keith Noonan 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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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