Robert J. Williams 
Key Points
- Unclear effects of DOGE initiatives on Palantir’s government contracts.
- Palantir executives recently sold substantial amounts of shares.
- Palantir is fundamentally solid but faces valuation concerns.
Market Overview
NASDAQ: PLTR
Market Cap: $197B
Today’s Change: -3.98% (-$3.48)
Current Price: $83.87
Price as of March 18, 2025, 3:59 p.m. ET
Palantir Technologies (PLTR -3.98%) was among the stocks heavily impacted in the recent stock market pullback. While the company’s shares surged around 264% over the past twelve months, they’re down over 31% off their peak. Investors are now weighing if the current price offers an opportunity or signals further downside ahead.
Is DOGE Good or Bad for Palantir?
A significant uncertainty facing Palantir is the effect of government cuts tied to DOGE—the Department of Government Efficiency launched by Elon Musk. Palantir, initially known for serving as a government data analytics contractor, still relies on U.S. government spending for about 42% of its overall revenue, particularly defense contracts.
Before DOGE initiatives, Palantir had momentum in federal circles as agencies leaned into artificial intelligence (AI) tools they provide. Yet, recent decisions by the White House to trim the Department of Defense (DOD) budget by around 8% per year over the next five years introduces revenue concerns. CEO Alex Karp appeared optimistic about DOGE on Fox Business News, affirming participation and support of the initiative.
Meanwhile, market signals are mixed. Karp adjusted his 10b5-1 stock selling plan, proceeding shortly thereafter with significant share sales. Co-founder Stephen Cohen similarly sold 3.75 million shares, totaling roughly $310 million, shortly after his plan became operational, now leaving only 310,000 shares pending sale.
Thus, despite management’s public optimism, investors must carefully evaluate if Palantir’s services match DOGE’s aim to reduce government expenditures. Although Palantir’s software may help streamline processes, the proposed defense budget drop—from $850 billion down to roughly $560 billion within five years—is sizable and could slow government contract growth.
Valuation vs. Growth
Apart from governmental budget uncertainties, another aspect to consider is Palantir’s high valuation despite ongoing growth. Palantir has successfully expanded into the commercial sector through its AI-oriented platform, drawing numerous clients. Yet, CEO Karp has described basic AI models as mere “high school experiments,” which risk gradual commoditization. Interestingly, Elon Musk, the key figure behind DOGE, is heavily investing in his company’s Grok AI models.
Palantir has wisely chosen to focus less on creating AI models themselves and more on developing the software needed to effectively operate and scale these models. This makes them valuable as a kind of “operating system” for business AI applications. Most of Palantir’s commercial clients are still experimenting and have not yet adopted these technologies on a broad scale, leaving plenty of room for growth.
Despite such commercial opportunities, investors note Palantir’s forward price-to-sales ratio remains steep at 53 even after the recent stock price decline. Compared to similar software companies—particularly those with around 36% revenue growth year-over-year—this valuation could cause hesitation for current buyers.
Is Palantir Stock a Buy, Sell, or Hold?
Considering management’s recent share sales, the company’s steep valuation metrics, and downward pressures from proposed government cuts, purchasing Palantir shares at current market levels seems unattractive. Palantir undoubtedly remains a capable company offering valuable technologies in AI and data analytics. Still, patience might reward investors willing to wait for more reasonable pricing. Personally, I’d need to see a noticeable drop in the stock price before becoming interested.
Geoffrey Seiler has no position in any stocks mentioned above. The Motley Fool holds positions in and recommends Palantir Technologies.
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