Is Palantir Stock Still a Buy After Its 135% Gain in 2025? History Says This Will Happen Next.

Key Points

• Independent analysts recently recognized Palantir as a leader in decision intelligence software and artificial intelligence/machine learning platforms.

• Palantir's revenue growth has accelerated in eight consecutive quarters due primarily to overwhelming demand for its artificial intelligence platform.

• Palantir is one of the most expensive software stocks the U.S. market has ever seen, and history says its share price could fall at least 73%.

• 10 stocks we like better than Palantir Technologies ›

Palantir Technologies (NASDAQ: PLTR) is one of the top five stocks in the S&P 500 (SNPINDEX: ^GSPC) for the second consecutive year. Shares have increased 135% in 2025, which is particularly impressive after the stock advanced 373% in 2024.

However, many Wall Street analysts view Palantir as overvalued, and history says the stock is likely to fall sharply at some point in the future. Here's what investors should know.

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Palantir is a leader in decision intelligence and AI/ML software

Palantir develops analytics and artificial intelligence (AI) software for the commercial and government sectors. Its platforms not only helps clients turn complex data into actionable insights, but also lets them train and deploy machine learning (ML) models that drive better decision-making over time. Use cases range from supply chain management and logistics to fraud detection and military intelligence.

The International Data Corporation (IDC) recently ranked Palantir as the market leader in decision intelligence software, and Forrester Research has recognized its leadership in AI/ML platforms. That puts Palantir in a good position. The data analytics software market is projected to expand at 28% annually through 2030, driven in large part by demand for AI, according to Grand View Research.

Palantir's sales growth has accelerated in eight consecutive quarters

Palantir reported strong second-quarter financial results that beat consensus estimates on the top and bottom lines. Its customer count increased 43% to 849 and the average spend per existing customer increased 28%. In turn, revenue jumped 48% to $1 billion, the eighth straight acceleration, and non-GAAP earnings rose 77% to $0.16 per diluted share.

Robust demand for Palantir's artificial intelligence platform (AIP) was a key driver of strong second-quarter results, and management is confident the company can maintain its momentum. "Twenty years of grinding has built a unique moat and a massive lead," said CTO Shyam Sankar. "Our foundational investments in ontology and infrastructure have positioned us to uniquely deliver on AI demand, both now and in the world ahead."

"Palantir's recent execution has been stunning, with material upward revisions across both commercial and government," wrote Mizuho analysts in a note to clients. But they warned, "The stock's multiple remains extreme, dramatically above anything else in software." Most Wall Street analysts have a similar opinion. Palantir has an average target price of $155 per share. That implies 13% downside from its current share price of $180.

Palantir is one of the most expensive software stocks in history

Palantir currently trades at 131 times sales. That makes it the most expensive stock in the S&P 500 several times over. The closest contender is AppLovin at 41 times sales. That means Palantir could lose about two-thirds of its value and it would still retain the title of most expensive stock in the index.

However, the situation is far more serious than even that summary conveys. I reviewed the valuations of more than 70 software stocks during the last two decades: Only three others ever achieved a price-to-sales (PS) ratio higher than 120 and they all eventually crashed, as detailed below:

• Snowflake peaked at 222 times sales in December 2020. The stock eventually dropped 73% and has yet to recover. Shares currently trade 41% below the peak price from December 2020.
• SentinelOne peaked at 148 times sales in September 2021. The stock eventually fell 82% and has yet to recover. Shares currently trade 74% below the peak price in September 2021.
• Zoom Communications peaked at 123 times sales in October 2020. The stock eventually fell 90% and has yet to recover. Shares currently trade 85% below the peak price from October 2020.

Here is the bottom line: Palantir is a leader in decision intelligence and AI/ML software, and the company's execution has been close to flawless in recent quarters. But Palantir also has the dubious distinction of being one of the most expensive software stocks in history. Snowflake, SentinelOne, and Zoom Communications traded above 120 times sales in the past, and the best outcome was a 73% decline. At some point, Palantir will likely suffer a similar decline as its valuation comes back to earth.

I have no idea when that day will come. The market can be irrational for months or even years, so Palantir could double or triple from here before reality catches up with the stock. But the risk-reward profile is skewed to the downside, so investors should avoid the stock or at least keep any positions very small.

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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies, SentinelOne, Snowflake, and Zoom Communications. The Motley Fool has a disclosure policy.