Investors continued to dump Palantir shares on Thursday, escalating concerns that the latest hot pick among retail traders could be fizzling out.
Shares of the mysterious technology and defense stock retreated more than 13% on Thursday, building on the prior session’s slide of around 19%. Wednesday’s drop marked Palantir’s worst session since May and came after the stock had touched an all-time high earlier in the day.
Wednesday’s initial decline came as investors keyed in on the CEO’s new stock sale plan and comments from Defense Secretary Pete Hegseth reported by The Washington Post on slashing defense budgets.
Now, the continued slide raises alarm of a popular stock among retail investors showing signs of petering out. Shares had run up amid investor excitement around artificial intelligence and the stock was the best performer within in the S&P 500 last year.
Palantir has been one of the most-bought securities among everyday investors, data shows. The company caters to these traders, with executives like CEO Alex Karp speaking directly to them on earnings calls and in video addresses.
Vanda Research found the stock has trailed just Nvidia, Tesla and the SPDR S&P 500 ETF Trust (SPY) in net inflows from retail investors, according to 2025 data that runs through early February. Palantir was also one of the most-bought stocks by individual traders over the past week, per data from JPMorgan released Wednesday.
Palantir has become a sort of cult favorite among the retail crowd in recent months. The stock shot up more than 60% in November alone as investors evaluated which companies would benefit from President Donald Trump’s return to the White House. Layered on top of that is the fact that Peter Thiel, co-founder of PayPal with Elon Musk, has chaired Palantir’s board for more than two decades. Musk is leading the DOGE efforts to cut government spending and there’s speculation he could even use Palantir’s technology to help him do it.
The company’s valuation has given some market participants reason for pause, as its 194 forward price-to-earnings multiple far exceeds the S&P 500‘s at 22. But loyalty from retail investors can actually help justify its lofty valuation, according to Gil Luria, head of technology research at D.A. Davidson.
Catalysts for sudden decline?
Two news items appeared to catalyze the initial pullback on Wednesday.
Hegseth reportedly told Pentagon officials to prepare to slash defense budgets by 8% annually over the next 5 years, a move that can worry investors about the state of deals between the government and contractors like Palantir. However, Palantir executives previously said they are optimistic about members of the new Department of Government Efficiency seeing value in the company’s contributions.
Palantir also disclosed in a regulatory filling on Tuesday night that CEO Karp can sell 10 million shares of the company’s stock over the next six month. The eccentric persona of Karp, who has drawn comparisons to Tesla CEO Musk, is considered a driver of attention and interest among retail investors in the stock.
With these declines, the stock is down about 11% this week. Still, shares still up more than 38% in 2025 after skyrocketing around 340% in the prior year.
While mom-and-pop investors have rushed into the stock, Wall Street isn’t as on board. The average analyst polled by LSEG has a hold rating, with a price target implying shares should drop from here.