After Soaring by 80% During the First Half of 2025, Could This Unstoppable Artificial Intelligence (AI) Stock Be Wall Street's Next Stock-Split Candidate?

Key Points

• Palantir stock surged 80% during the first six months of 2025 and is hovering near all-time highs.

• Given the company's rising share price, some investors may perceive the stock as expensive.

• While Palantir stock has risen exponentially, there are more factors to consider with stock-splits than just a company's share price.

• 10 stocks we like better than Palantir Technologies ›

During the first half of 2025, the S&P 500 and Nasdaq-100 indexes generated total returns of 6% and 8%, respectively. Perhaps unsurprisingly, the top-performing stock across both indexes was data mining specialist Palantir Technologies (NASDAQ: PLTR), whose shares gained a whopping 80% during the first six months of 2025.

With shares of Palantir rocketing higher by the day, some investors may be wondering if the artificial intelligence (AI) darling could be the next big stock-split candidate on Wall Street.

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Let's dig into how stock splits work and what could happen with Palantir stock should the company choose to perform a split.

What is a stock split, and why do companies perform them?

The best way to understand how stock splits work is to look at an example.

Let's say a company is trading for $100 per share and has 1 million shares outstanding, resulting in a market capitalization of $100 million. If the company decided to perform a five-for-one split, the share price would be reduced by a factor of five ($20 per share) while the shares outstanding would rise by fivefold (5 million shares). As investors can see, the stock split does not actually change the market capitalization of the company. Rather, a stock split is a form of financial engineering.

Stock splits often occur after a company's share price has experienced a significant run-up and the stock is perceived as expensive. This is an important idea to understand. Just because a company may boast a stock price of, say, $1,000 per share, that doesn't necessarily mean the valuation of the company is unusually high.

In order to determine a company's value, smart investors will look at ratios such as price-to-sales (P/S) or price-to-earnings (P/E) and benchmark those multiples against other comparable businesses.

Let's take a look at Palantir's valuation and then assess what could happen if the company splits its stock.

Image source: Getty Images.

Does Palantir make a good stock-split candidate?

The analysis below measures the P/S multiples across a variety of high-growth software-as-a-service (SaaS) companies. Palantir's P/S ratio of 110 has expanded by roughly threefold over the last year. Moreover, the company is approximately three times more expensive than the next closest peer in the cohort below.

PLTR PS Ratio data by YCharts

Given the trends above, it's safe to say that Palantir stock has been rising exponentially. On top of that, investors have a sound argument that the stock is pricey.

But even with those criteria met, is performing a split the logical move for Palantir right now?

What could happen if Palantir performs a stock split?

As I alluded to above, stock splits do not only occur after a sharp or prolonged rise in share price. Rather, they are often attached to the idea that the stock is expensive. The irony here is that this perception goes both ways.

What I mean by that is after a company splits its stock, the new (lower) share price is often perceived as "cheaper." But as I explained above in my example, stock splits do not change the market capitalization of a company.

Following a split, it is not uncommon for a new group of investors to begin accumulating shares -- as the perception of lower share prices can make people believe they are investing in the company at a better price.

This is far from the case, though. As more investors pour into the stock, shares start to rise again -- ultimately fueling the market cap of the company. What this means is that sometimes, a company can actually become more "expensive" following a split.

While the lower share price may make some investors think they are investing in a hot AI stock at a good price, savvy institutional investors will recognize that Palantir's valuation multiples could become even more stretched. As a result, these large banks and hedge funds could choose to trim or exit their positions in Palantir and spur an unwanted and unforeseen sell-off.

For these reasons, I think performing a split would be counterintuitive for Palantir.

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Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, Datadog, MongoDB, Palantir Technologies, ServiceNow, Snowflake, and Zscaler. The Motley Fool has a disclosure policy.