Palantir Is Sinking Today -- Is It Time to Buy the Stock?

Following huge gains in yesterday's trading, Palantir Technologies (NASDAQ: PLTR) stock is losing ground Thursday. The company's share price was down 3.9% as of 10:15 a.m. ET. At the same point in the day, the S&P 500 (SNPINDEX: ^GSPC) had fallen 3.3%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) had slipped 3.7%.

Palantir stock surged yesterday after President Trump announced a 90-day pause on "reciprocal tariffs" and a near-universal 10% tariff on all imported goods. The lone exception to the reciprocal tariff pause was China, which Trump said would see its tariffs rise to 125%. But the administration clarified today that the new effective tariff rate on Chinese products was actually 145%, because the 125% tax cited yesterday was in addition to a previously existing 20% tariff. Investors responded by selling out of stocks again today, but Palantir is still up roughly 18% in 2025.

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Is today's pullback an opportunity to buy Palantir stock?

With Palantir stock priced at roughly 159 times this year's expected earnings and 55 times expected revenue, the company has an extremely growth-dependent share price that stands out even among tech sector peers with heavily forward-looking valuation profiles. Unless you have very high levels of risk tolerance, the stock is probably not a good portfolio fit, even after recent volatility.

On the other hand, Palantir's leadership position in artificial intelligence (AI) software and strong net income and free cash flow margins suggest the stock deserves to command a substantial valuation premium. The company's heavy U.S. sales contribution, fast-growing domestic business, and contracts with defense and governmental agencies and Western allies also mean that the business could be very well positioned to navigate macroeconomic and geopolitical shifts compared to most megacap tech companies.

So while valuation volatility could continue, I think investors who buy Palantir stock on pullbacks as part of a dollar-cost-averaging strategy will see strong returns over the long term.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.