Why Palantir Stock Is Sinking Today

Shares of Palantir Technologies (NASDAQ: PLTR) dropped on Thursday, falling 5.9% as of 2:48 p.m. ET. The move down comes as the S&P 500 lost 0.2% and the Nasdaq Composite fell 0.4%.

A report last week from The New York Times asserted, among other things, that Palantir, which leverages artificial intelligence (AI) to analyze massive data sets and help clients make better decisions, has gained incredible access to data across the federal government, which could give President Donald Trump "untold surveillance power."

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Karp says there is no surveillance

Ethical concerns notwithstanding, investors took the report as further proof that Palantir's bottom line will continue to grow as it becomes further embedded in the operation of the federal government. However, in an interview with CNBC on Thursday, CEO Alex Karp was adamant that his company is "not surveilling Americans," leading to the stock's decline today.

Image source: Getty Images.

Even if what Karp says is true, however, the company is still deeply embedded in the federal government, and that relationship appears to be growing.

Beware Palantir's valuation

Despite this increasingly cozy relationship, I still think this stock is just too expensive. I don't doubt Palantir's ability to win new government contracts, but I don't think it can grow enough to justify its incredible valuation. Its price-to-earnings ratio (P/E) of 560 is wildly high and, in my opinion, divorced from reality. There is no doubt that Palantir, by and large, is executing at a very high level, but a valuation this high means it must execute perfectly.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $668,538!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $869,841!*

Now, it’s worth noting Stock Advisor’s total average return is 789% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

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.