Palantir has become the worst performing stock in the S&P 500. AI investor favorite is down for the fifth day

Shares of Palantir Technologies, one of the most highly valued stocks on Wall Street, were the worst performers in the S&P 500 index on August 19. Quotes declined for the fifth day in a row, but because of the dizzying growth over the past year, Palantir securities are still very expensive. Wall Street can not come to a consensus on a fair valuation of the company amid its exorbitant cost.

On August 19, Palantir's stock had the worst performance among S&P 500 stocks, Barron's reported. During the day, its shares plummeted 9.4% to close at $157.75. One of the most popular companies among AI investors has fallen in price for five consecutive trading sessions, its most prolonged drawdown since March, Yahoo Finance noted. In those five days, Palantir has lost 12% in value.

There are no obvious reasons for a sell-off in Palantir shares: investors probably decided to lock in profits after a stunning rally, Barron's suggests. Since the beginning of 2025, quotes of the developer of data analysis systems for the military, intelligence agencies and banks have soared 118%, and over the past 12 months - by 409% on the back of news of lucrative government contracts, excitement around AI and strong reporting.

Because of this growth, Palantir's shares have become extremely expensive to buy, Barron's states. Its securities are now trading at a multiple of 214 to projected earnings for the next 12 months, while the average multiple for the S&P 500 index is only 22.

Freedom Broker on August 19 raised its target price on Palantir shares from $80 to $125 per share after improving its revenue and free cash flow forecasts, but maintained a "Sell" recommendation. The investment brokerage firm said that "Palantir's current premium valuation levels do not reflect the expected slowdown in the growth of its business," and also noted "challenges with international expansion and risks of significant dependence on the U.S. public sector."

Prominent shorts and Citron Research founder Andrew Left said a week ago that Palantir stock was grossly overvalued. Earlier this week, Left took a new batch of criticism, calling Palantir "a company divorced from fundamentals." In an Aug. 18 note, he argued that if Palantir were trading at a valuation similar to AI industry leader OpenAI, its stock would be worth $40 a share - and even that price would be overvalued. "In the end, markets are able to remain irrational longer than an investor is able to remain solvent," Barron's summarizes.

Palantir shares hit an all-time high of $190 on August 12. However, now the capital outflow from "overheated" shares of AI companies begins, warns Investor's Business Daily with reference to Ulrike Hoffmann-Burhardi, head of the global equities department at UBS. The economist at Switzerland's largest bank advised not to abandon investments in AI, but to reduce risks amid a correction in market leaders. She suggested that clients add to their portfolios "lagging" securities of China's technology sector, Internet companies and software developers - which are part of the AI ecosystem, but have not yet managed to rise in price.

Wall Street can't reach a consensus on Palantir's valuation amid its exorbitant valuation, Barron's writes. Of the 29 analysts tracked by FactSet, seven recommend buying the stock, four recommend selling, and most advise holding. Target prices range from $45 to $210.

This article was AI-translated and verified by a human editor