Palantir Technologies (PLTR +1.25%) stock tumbled on Thursday, falling as much as 6.5%. As of 3:44 p.m. ET, the stock was still down 4%.
The catalyst that weighed on the artificial intelligence (AI) software and data mining specialist was a news report linking Palantir to controversy surrounding the U.S. Immigration and Customs Enforcement (ICE) agency.
Image source: Getty Images.
ICE agents have been using tools supplied by Palantir Technologies to sift through tips submitted by the public in the agency's immigration enforcement operations, according to a widely circulated news report.
The Department of Homeland Security (DHS) released a list of use cases for various AI tools this week. It revealed that Palantir's AI was instrumental in the AI-Enhanced ICE Tip Processing service. This tool helps sort through tips submitted to ICE, surfacing the most urgent information while providing a "high-level summary of the tip."
Palantir has been providing services to DHS for 14 years, so the news isn't new. However, a wave of controversy has followed ICE in recent weeks, and negative public sentiment surrounding the federal agency is one of the things weighing on Palantir stock.
NASDAQ: PLTR
Key Data Points
Palantir has also been caught up in a broad AI-related sell-off, caused by fears that AI adoption may be slowing, even as companies ramp up spending to capitalize on the opportunity. The stock is down more than 27% from its peak, as investors try to balance the risks and the long-term opportunities represented by AI.
Furthermore, Palantir is among the most expensive stocks on the market, currently selling for 350 times earnings -- even after its recent fall from grace. Looking ahead, the stock is trading at 105 times next year's expected earnings, a still lofty valuation.
With a multiple of that magnitude, the stock will be extremely volatile and can tumble on any bit of bad news.
Don't get me wrong: I'm a tied-in-the-wool Palantir bull, but investors should be cautious given the stock's current valuation.
