Topline
Shares of Palantir fell more than 8% after market open on Tuesday, leading a broader market decline after the software firm reported better-than-expected earnings, as some economists warned of “rally exhaustion” after a meteoric rise for several stocks this year.
One analyst suggested stocks may be suffering from “rally exhaustion.”
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Key Facts
Palantir’s stock decreased 8.1% to around $190 shortly after trading opened Tuesday, pacing what would be the largest single-day drop for the stock since a 9.3% decline in August.
Palantir headlined broader declines across the Nasdaq, with the index down 0.9%, followed by Intel (down 4.7%), Micron (3.1%), Tesla (2.5%), Qualcomm (1.3%), Alphabet (1.1%), Microsoft (0.7%) and PayPal (2.3%).
The Dow Jones Industrial Average and S&P 500 dropped 0.3% and 0.6%, respectively, as Nvidia fell 2%, followed by declines for Boeing (1.9%), Apple (0.2%) and Cisco (1.2%).
Palantir on Monday reported quarterly revenues of $1.18 billion and earnings per share of $0.21, above estimates of $1.09 billion and $0.17, respectively, while also boosting its revenue forecasts for its current quarter to $1.33 billion, above projections of $1.19 billion, according to FactSet.
JPMorgan analyst Jason Hunter wrote the S&P 500 has continued an “orderly, low-volatility rally” in recent weeks, though broader gains have been led by an “even narrower group of stocks” that are weaker than they appear, as Hunter suggested stocks may experience “rally exhaustion” and decline.
Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick said during an investment panel in Hong Kong Tuesday they expect a major correction in the stock market, as Solomon said he anticipated a “10 to 20% drawdown” in the next two years, while Pick forecast declines up to 15%.
Why Are Palantir Shares Down Today?
Analysts suggest there may be a few factors leading to Palantir’s shares declining on Tuesday: RBC Capital economist Rishi Jaluria said Palantir’s earnings are “overwhelmingly U.S.-centric,” while international performance is “stagnant.” Jaluria suggested there was “limited visibility” into Palantir’s long-term growth prospects as its AI business develops. Deutsche Bank strategist Jim Reid wrote that while Palantir’s results were “good,” yet investors were “disappointed at the lack of company visibility” for 2025 and suggested the company’s stock may be overvalued.
Big Number
175%. That’s how much Palantir shares surged this year as of Monday’s close, rising from a 52-week low below $47. That far outpaces broader gains for the S&P 500, which has jumped 16% on the year, as well as the tech-heavy Nasdaq (22.5%) and Dow (11.4%).
Key Background
Palantir, like many tech firms this year, has soared with growing demand for AI. Several companies, like Microsoft, OpenAI and Amazon, among others, have spent hundreds of billions in combined AI partnerships and deals, with investors fueling speculation over whether there may be an “AI bubble” that could soon burst, leading to a steep decline across the market. Palantir CEO Alex Karp lauded his company’s growth in recent quarters, saying in August its Q2 was “phenomenal” as revenues “accelerated rapidly” on the “astonishing impact of AI leverage.” Palantir quickly became one of the largest 20 U.S. companies as its stock has rallied this year, and the company is now valued at just over $461 billion, ranking the 22nd-largest company globally behind Netflix ($466 billion) and ahead of Johnson & Johnson ($450 billion).
