The last time Palantir Technologies (PLTR 4.30%) fell as much as it has currently was in April 2025. Investors who bought on the pullback finished the year with a sizzling 140% gain.
History is chock-full of examples of how investing in promising growth stocks when they were down significantly can pave the way for life-changing returns. Could buying Palantir today set you up for life?
NASDAQ: PLTR
Key Data Points
Only the beginning?
The answer to that question could be a resounding "yes" if Palantir Technologies co-founder and CEO Alex Karp is right. Karp wrote in his latest letter to shareholders, "We are at the outset, the very beginning, of a generational project." Assuming Palantir truly is at the beginning of its growth curve, it's off to a great start.
Palantir's total revenue soared 70% year over year and 19% sequentially in Q4 to $1.4 billion. In the past, the company relied primarily on government contracts. That isn't the case anymore. Palantir's U.S. commercial revenue skyrocketed 137% year over year in Q4 to $507 billion, not too far behind its U.S. government revenue of $570 million.
With that kind of impressive growth, why has Palantir's stock declined sharply year to date? It has been caught up in a massive sell-off of SaaS stocks. But there's a strong case to be made that Palantir's pullback isn't warranted.
Karp would likely argue with anyone who maintained that Palantir is a typical AI stock. He stated in the recent shareholder letter that AI models "must be tethered to objects in the real world, and it is that tether, that means of grounding and orientation, that we have built." Based on Karp's take, investing in Palantir right now makes a lot of sense.
Image source: Getty Images.
Valuation vs. vision
There's one glaring problem, though. Even after Palantir's steep share price decline, its stock still trades at roughly 130 times forward earnings and 49 times forward sales. To call that an expensive valuation is an understatement.
Palantir must continue delivering ginormous growth to have any chance of justifying those sky-high valuation multiples. Any hiccups along the way would almost certainly lead to another significant sell-off, perhaps an even greater one than what we've seen in 2026.
One potential hiccup comes to mind immediately. Palantir has become so tightly linked with the Trump administration that it could work against the company if the political winds shift in 2028. While Palantir has dramatically increased its commercial revenue, more than 40% of its total revenue still comes from the U.S. government.
Karp's vision for the company paints a picture of long-term, sustained growth at unprecedented levels. Perhaps he will be proven right. However, I think other stocks offer a better risk profile for long-term investors.
