Palantir Stock: A High-Flying Rally Faces Valuation Headwinds

The shares of data analytics firm Palantir have been among the standout performers in equity markets this year, with their value more than doubling since January. This surge is fueled by robust financial growth, significant U.S. military contracts, and pervasive enthusiasm for artificial intelligence. However, the stock's extreme valuation multiples are simultaneously sowing seeds of investor anxiety, raising questions about the durability of its upward trajectory.

The spectacular price rally has propelled Palantir's valuation to extraordinary levels. Based on current earnings, the stock trades at a price-to-earnings (P/E) ratio well above 450. This multiple implies the market is pricing in expectations of persistently explosive growth; any deviation from this trajectory could trigger severe price volatility.

Market sentiment is sharply divided. On one side, institutions like Bank of America have reiterated buy ratings, citing the compelling investment thesis centered on AI adoption and data platform dominance. Conversely, other observers caution that even a growth deceleration beginning in 2026 could precipitate a sharp correction. The core debate, therefore, is not whether Palantir will grow, but whether its current share price has already fully—or excessively—discounted that future growth.

Powerful Growth Engines: Government and Commercial AI

Operationally, Palantir continues to post impressive metrics. For the third quarter of 2025, revenue jumped 63% year-over-year to $1.18 billion. Its U.S. commercial business is particularly dynamic, with segment revenue soaring by 121%. This demonstrates Palantir's successful expansion beyond its foundational government contracting roots.

On the public sector side, a series of major defense contracts provides substantial tailwinds. Recent announcements include an approximately $10 billion contract with the U.S. Army and a further $448 million deal with the U.S. Navy. These agreements solidify the company's role as a critical provider in the security-sensitive data and AI domain.

Key operational highlights include:
- Q3 2025 revenue growth: +63% year-over-year
- U.S. commercial revenue growth: +121% year-over-year
- Major government contracts: U.S. Army (~$10B), U.S. Navy ($448M)

This dual momentum from defense spending and booming commercial AI adoption is currently the central driver for the stock.

Should investors sell immediately? Or is it worth buying Palantir?

Strong Uptrend Shows Signs of Short-Term Exhaustion

While the long-term chart pattern remains decisively bullish—the stock is up approximately 112% over the past twelve months and about 124% year-to-date—short-term indicators suggest overheating. The share price trades notably above its key moving averages, exceeding its 200-day average by nearly 25%, which underscores the steepness of the advance.

In the near term, however, momentum appears stretched. The 14-day Relative Strength Index (RSI) sits near 79, deep in overbought territory. Although the stock has rebounded strongly from a mid-January interim low, it remains roughly 8.5% below its recent 52-week high from early November. This price action suggests the market is approaching a zone where profit-taking becomes increasingly likely.

Technical Levels to Watch

From a charting perspective, the stock is in a consolidation phase within its broader uptrend following its recent recovery. Technicians are monitoring several key price zones:

• Immediate Support: The area around $190–$194 per share is currently viewed as a crucial floor.
• Next Resistance: A sustained breakout above approximately $198 would signal potential for the rally to extend toward record highs.
• Deeper Support: A breach below the current support zone could open a path back toward the $150 level, where a pronounced intermediate recovery previously began.

The latest rebound from the $147 area was primarily driven by technical buyers targeting a key retracement level. The forthcoming test is whether sufficient momentum exists to overcome the resistance cluster in the upper $190s.

Conclusion: Balancing Exceptional Growth with Lofty Expectations

Palantir finds itself at a crossroads, caught between powerful fundamental drivers and significant valuation risk. On one hand, the company boasts exceptional growth rates, formidable U.S. defense contracts, and a rapidly expanding commercial AI business. On the other, the combination of a sky-high P/E ratio, an overbought RSI reading, and proximity to 52-week highs signals elevated near-term vulnerability to a pullback.

In the short term, the stock's behavior around the technical resistance in the upper $190s, coupled with the progression of growth in upcoming quarterly reports, will likely determine whether the next major move points toward new highs or a more pronounced correction.