Palantir stock has slipped into a bear market. They are still the best performers in the S&P 500 this year

Shares of Palantir, a developer of AI for military and civilian needs, fell by more than 20% against the record and found themselves in the territory of the bear market. The securities are getting cheaper for the sixth trading session in a row. Pressure on quotations was exerted by a large-scale sell-off in the tech sector: investors are fixing profits on overheated securities before the speech of Fed head Jerome Powell on Friday. Despite the fall, Palantir securities are still worth twice as much as they were at the beginning of the year.

Shares of Palantir plunged 9.7% to $142.3 in trading on August 20. It became their minimum for more than a month - since July 14. After that, however, the quotations partially reduced the fall - to about 3%.

Wednesday's drawdown marked the sixth consecutive trading session when investors actively got rid of the company's shares, CNBC noted. This series of declines was the longest since April 2024, the channel added. Moreover, the sell-off has left the company's market value at the moment 20% below its recent record. This puts Palantir's securities in the bear market zone, CNBC wrote.

Still, even with Wednesday's drop, the stock is still up about 102% since the beginning of the year and 370% over the past 12 months. Despite the collapse, Palantir stock remains the best growth stock in the S&P 500 index for 2025.

The decline in Palantir shares is superimposed on a large-scale sell-off in the tech sector as a whole: investors are taking profits on expensive securities ahead of Fed chief Jerome Powell's speech at a forum in Jackson Hole on Friday. The market is worried about overheated company valuations on the back of the AI boom, especially given that the regulator is unlikely to go for the large-scale policy easing that was expected at the beginning of the year.

In addition, Wall Street analysts are concerned about the overvaluation of Palantir securities amid their sharp growth thanks to the excitement around AI. Even taking into account the fact that the company's shares were in the "bearish" zone, they are worth 193 times more expensive than the forecasted earnings for the next 12 months (P/E indicator), writes CNBC. By comparison, the average multiple for the S&P 500 index is only 22.

Prominent short-seller Andrew Left, founder of Citron Research, earlier this week called Palantir "a company divorced from fundamentals." Even if Palantir traded at a valuation similar to AI industry leader OpenAI, he said, its stock would be worth $40 a share - and even that price would be overvalued.

"[Palantir CEO Alex] Karp and his team can be proud of the result. But for investors, this is where discipline comes into play. Comparisons are the enemy of happiness, and if you measure Palantir against true AI leaders, its price already reflects success beyond fundamentals," Left said in a note cited by CNBC.

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