What Happened?
Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 11.6% in the morning session as markets continued to struggle following the broad selloff triggered by weak economic data in the previous week. On Friday, February 21, 2025, the S&P 500 dropped 1.7%, and the Nasdaq fell 2.2% after PMI numbers showed the U.S. services sector contracted, and the University of Michigan's consumer sentiment index came in below expectations.
Adding to Wall Street's anxiety, rumors swirled that Microsoft is trimming its forecasts on data center projects, raising concerns that AI-related investments may get a little too bloated.
TD Cowen analyst Michael Elias flagged three key findings from his research. He noted that Microsoft "1) cancelled leases in the U.S. totaling 'a couple of hundred MWs' with at least two private data center operators, 2) has pulled back on the conversion of SOQ's to leases, and 3) has re-allocated a considerable portion of its international spend to the U.S."
Jefferies analysts see this as more of a regional spending adjustment, noting that Microsoft executives "strongly refute" any major shift in their data center strategy.
Investors' attention now turns to Nvidia's upcoming earnings report, a crucial barometer of AI infrastructure demand. The chip giant's Q4 2024 results and forward guidance will be closely scrutinized for signals on whether AI spending remains strong or is beginning to taper off.
Palantir also has the not much-coveted title of being the most "expensive stock in the S&P 500," raising concerns about a potential pullback. Adding to investor unease, CEO Alex Karp recently introduced a new stock plan that could significantly increase the share count, potentially diluting existing shareholders.
With so many moving pieces, investors are bracing for a volatile week ahead, while hoping for clarity.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Palantir? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Palantir’s shares are extremely volatile and have had 30 moves greater than 5% over the last year. But moves this big are rare even for Palantir and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 14.5% on the news that CEO Alex Karp announced a plan to sell up to 9.98 million shares worth $1.2 billion. The stock sale is likely to hurt stock price as the newly issued shares dilute the ownership of existing shareholders.
Separately, Defense Secretary Pete Hegseth warned department officials at the Pentagon to prepare for budget cuts, signaling potential pressure on Palantir's government contracts and future growth.
Palantir is up 23.2% since the beginning of the year, but at $92.63 per share, it is still trading 25.7% below its 52-week high of $124.62 from February 2025. Investors who bought $1,000 worth of Palantir’s shares at the IPO in September 2020 would now be looking at an investment worth $9,748.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
