Palantir Is Sinking Today -- Is the Artificial Intelligence (AI) Stock a Smart Buy Right Now?

Palantir (NASDAQ: PLTR) stock is getting hit with another day of substantial sell-offs in Thursday's trading. The company's share price was down 6.8% as of 2:20 p.m. ET amid the backdrop of a 0.7% pullback for the S&P 500 and the Nasdaq Composite indexes.

Palantir's valuation is retreating today after Walmart issued sales guidance for this year that spooked Wall Street. On the heels of a 5.6% increase for its annual revenue last year, the retail giant only expects sales growth to be between 3% and 4% this year.

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 »

Walmart is the largest retailer in the U.S., and investors often look to the company's quarterly reports, commentary, and guidance for indicators about the health of the overall economy. So while Palantir's business has limited immediate connections to Walmart, the retailer's results and performance outlook can have a significant impact on overall valuation trends across the stock market.

The disappointing sales guidance also comes on the heels of other recent bearish catalysts for the artificial intelligence (AI) software leader. CEO Alex Karp recently disclosed plans to sell 1.2 million shares of company stock over the next six months, and the Department of Defense (DOD) has been ordered to move ahead with $50 billion in budget cuts for next year.

Is Palantir stock a buy on the pullback?

With today's sell-off, Palantir stock is now off roughly 16% from its high. On the other hand, the company is still up roughly 328% over the last year alone -- and it's valued at approximately 189 times this year's expected earnings and 65 times expected sales. Even in the context of its strong sales and earnings growth, the company's valuation profile sets the stage for big pullbacks in conjunction with unfavorable macroeconomic shifts and business-specific developments.

Even with today's pullback, the case could be made that Palantir stock is still priced for near-perfection in the near term. On the other hand, I think the stock still offers explosive upside potential for long-term investors at current prices.

Palantir is posting fantastic margins and strong sales growth, and it occupies a leading position in its corner of the AI market. With long-term demand indicators in both the public and private sector looking promising, I believe the stock is a worthwhile buy-and-hold play. Today, Palantir has a market cap of roughly $245 billion, but I expect it will be able to hit a $1 trillion market cap by 2030.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $361,026!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,425!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $562,659!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Learn more »

*Stock Advisor returns as of February 3, 2025

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Walmart. The Motley Fool has a disclosure policy.