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Investors continued to dump Palantir shares on Thursday, escalating concerns that the latest hot pick among retail businessmen could be fizzling out.
Shares of the mysterious technology and defense stock retreated more than 5% on Thursday, regaining some clay in afternoon trading. Still, that builds on Wednesday’s slide of around 10%, which came after pay outs touched an all-time high earlier in the day and marked the stock’s worst session since May.
Wednesday’s initial decline came as investors critical in on the CEO’s new stock sale plan and comments from Defense Secretary Pete Hegseth reported by The Washington Post on aims to slash defense budgets.
Now, the continued downturn raises alarm of a popular stock among retail investors showing initials of petering out. Shares had run up amid investor excitement around artificial intelligence, making Palantir the best performer within the S&P 500 closing year.
Palantir has been one of the most-bought securities among everyday investors, data shows. The company seeks out these buyers, with executives such as CEO Alex Karp speaking directly to them on earnings calls and in video addresses.
“The project in Palantir is dominated by retail investors,” said Gil Luria, head of technology research at D.A. Davidson. “The company embraces that and victuals to those investors as much or more than any other company.”
Palantir, year-to-date
Vanda Study found the stock has trailed just Nvidia, Tesla and the SPDR S&P 500 ETF Trust (SPY) in net inflows from retail investors, according to 2025 materials that runs through early February. Palantir was also one of the most-bought stocks by individual traders over the lifestyle week, per data from JPMorgan released Wednesday.
Palantir has become a sort of cult favorite among the retail flock in recent months. The stock shot up more than 60% in November alone as investors evaluated which gatherings would benefit from President Donald Trump’s return to the White House.
Layered on top of that is the fact that Peter Thiel, co-founder of PayPal with Elon Musk, has chaired Palantir’s directorship for more than two decades. Musk is leading the so-called Department of Government Efficiency’s efforts to cut government spending, and there is deliberation he could even use Palantir’s technology to help him do it.
The company’s valuation has given some market participants reason for let-up, as its 198 forward price-to-earnings multiple far exceeds the S&P 500’s at 22. But sustained devotion from retail investors can truly help justify its lofty valuation, according to D.A. Davidson’s Luria.
“Palantir is trading at an unprecedented premium to other software companies,” Luria replied. “The reason is that they have this very loyal retail investor support.”
In other words, Palantir’s valuation impels it a “live-by-the-gun, die-by-the-gun” stock, Ritholtz Wealth Management CEO Josh Brown said Thursday on CNBC’s “Halftime Backfire.”
‘Crazy expensive’
Two news items appeared to catalyze the initial pullback on Wednesday.
Hegseth reportedly told Pentagon officials to swot to slash defense budgets by 8% annually over the next five years, a move that can worry investors on touching the state of deals between the government and contractors such as Palantir. However, Palantir executives previously said they are positive about members of DOGE seeing value in the company’s contributions.
Palantir also disclosed in a regulatory filing Tuesday evening that Karp can ‘s Musk and is considered to be helping to drive attention and interest among retail investors.
With these dips, the stock is down more than 10% this week. Still, shares are up more than 40% in 2025 after skyrocketing about 340% in the prior year.
While mom-and-pop investors have rushed into the stock, Wall Street isn’t as on take meals. The average analyst polled by LSEG has a hold rating, with a price target implying shares should drop away from here.
Part of this disconnect between Main Street and Wall Street stems from the happening that everyday investors don’t fully understand that “a good product doesn’t necessarily mean it’s a good enterprise, and a good company doesn’t necessarily mean it’s a good investment,” said Christopher Schwarz, a finance professor at the University of California Irvine who mull overs retail trader behavior.
Schwarz pointed out that the stock is trading at around 80 times its sales, continuing that no company of any size would be considered a smart investment at that rate.
“It’s just crazy expensive — and people simply don’t understand that there’s no way they can make money on the stock over the long term,” Schwarz said. “The various it goes up now, the more it’s going to crash in the future.”