Why Palantir Stock is Falling During the Tariff Sell-Off (Even Though It’s Not Directly Affected)

$Palantir Technologies Inc.(PLTR)$

So today I want to talk about what’s going on with Palantir stock and why it’s been falling hard during this recent market pullback — even though Palantir isn’t directly impacted by the new tariffs being discussed and imposed.

On the surface, it might seem confusing. Palantir isn’t a company that imports physical products or components from overseas. It’s a software and data analytics firm. Tariffs shouldn’t affect it — at least not in a direct, operational sense. And yet, the stock is down over 9% today alone and has declined significantly from its highs. So what gives?

Well, there’s actually a clear reason why Palantir is being hit hard in this market — and I’ll break it down in two parts:

1. Why the stock is falling, even without direct exposure to tariffs,

2. Whether this drop creates a buying opportunity — or not.

First: Let’s Talk Valuation and Sentiment

For months now, I’ve been sharing my proprietary discounted cash flow (DCF) model for Palantir with viewers. Based on my analysis, the stock was overvalued — and I’ve been consistently warning investors to be cautious and avoid chasing the hype.

As of this morning, I’ve updated the model again. According to my latest calculations, the intrinsic value of Palantir stock is $23.70 per share.

That’s based on a detailed forecast of Palantir’s future cash flows, profit margins, reinvestment rates, and risk-adjusted discounting. It’s not a guess — it’s based on data, assumptions, and models I’ve been refining for years.

Now compare that intrinsic value to where Palantir is currently trading — around $75 per share, even after a steep decline. That’s still more than three times my estimate of fair value.

To put this in perspective, Palantir hit a 52-week high of $125. The stock has been on an absolute tear, fueled largely by investor optimism, speculative buying, and broader enthusiasm around AI, defense tech, and software platforms that support government and commercial infrastructure.

Some of that enthusiasm was justified — but a lot of it was priced in far too early and far too aggressively.

What Fueled the Surge in Palantir’s Stock Price?

Much of Palantir’s rise came in the months following Donald Trump’s election victory, which sparked a market-wide rally — especially in defense, cybersecurity, and domestic-focused technology companies.

Investors were betting that companies like Palantir, which already had strong ties to the U.S. government and were rapidly expanding into commercial sectors, would benefit massively from an administration focused on national defense, data security, and AI infrastructure.

And to be fair, Palantir has been executing well on the business side.

• Their commercial business is growing rapidly.

• They’ve maintained a strong government pipeline.

• They’ve expanded their footprint in the U.S. and abroad.

• Their balance sheet is pristine — close to $5 billion in cash and zero long-term debt.

• They’ve got billions in remaining performance obligations, indicating strong visibility into future revenues.

• And they run an asset-light business model with excellent long-term margin potential.

So yes — Palantir is a great business. But the problem is that a great business doesn’t always make a great investment if the price is too high.

And for months, I’ve argued that Palantir’s valuation was simply running way ahead of reality. The forward price-to-earnings (P/E) ratio shot up past 150, and at one point was pushing 200. That’s astronomical — even for a high-growth tech company.

Sure, I understand paying a premium for a quality company. But a premium is one thing — and what we saw with Palantir was pure hype pricing.

So Why Is It Falling Now?

Palantir is falling for two big reasons:

1. The Enthusiasm Is Draining Out of the Market

When you have a company trading at a valuation based on hype, hope, and forward-looking momentum — rather than fundamentals — it becomes highly vulnerable to a shift in sentiment. And that’s what we’re seeing now.

With the recent tariff announcements, market optimism is fading. Investors are becoming more risk-averse. They’re pulling capital out of high-valuation, momentum-driven stocks and moving toward safety — cash, bonds, dividend payers, and more reasonably valued equities.

Palantir, with its inflated valuation, was one of the first to get hit. Even though the business hasn’t changed much in the last few weeks, the sentiment around risk assets has shifted dramatically.

This is a great reminder that price isn’t just about fundamentals — it’s also about psychology and market dynamics. And in markets, sentiment changes fast.

2. Indirect Economic Exposure

Even though Palantir doesn’t import goods and isn’t exposed to tariffs in a traditional sense, it is exposed to the economic ripple effects that tariffs can cause.

Here’s how:

• As tariffs lead to slower global trade and weaker economic activity, large enterprises begin tightening their belts. That can lead to delayed or canceled software contracts, reduced IT budgets, and a general slowdown in tech procurement.

• The U.S. government, which is Palantir’s biggest customer, is also under budget pressure. There have already been spending freezes and cuts in some departments, and with more economic uncertainty, we could see more tightening across the board.

• As consumers feel less wealthy — and data shows several trillion dollars in net worth have been wiped out in the last two days alone — that filters down through the economy. Lower spending leads to weaker corporate profits, which leads to more cautious behavior across industries.

Palantir could be indirectly impacted as its customers — both public and private — start re-evaluating how much they want to spend on large, transformational data analytics projects.

Is Palantir a Buy After This Sell-Off?

So that brings us to the big question: Is Palantir a buy now, after this pullback?

And my answer is still no. Not even close.

At the current price of $75, the stock is still trading at more than 3x my intrinsic value of $23.70. That’s a huge gap.

And even if you look at relative valuation — like forward P/E — the story isn’t any better. Palantir is trading at a forward P/E of around 106. That’s still extremely expensive.

Historically, a forward P/E of 50 was the ceiling I considered reasonable for a company like Palantir, considering its growth, margins, and strategic advantages. I might stretch that to 55 or 60 given the recent business momentum — but 106? That’s still way too rich for me.

Until the valuation comes down — or the fundamentals dramatically improve — Palantir remains a great business, but a bad stock at these levels.

Conclusion

Markets are cyclical. Investor enthusiasm rises and falls, and companies that benefit from overexuberance are also the most at risk when the mood changes. Palantir is exactly that kind of company. It’s not that it’s a bad business — far from it. It’s actually an exceptional one. But the stock price got way ahead of reality.

If the price comes down closer to my fair value estimate — or if earnings grow faster than expected — I’ll reevaluate. But for now, I’m staying patient and disciplined. If you’re a long-term investor and you truly believe in Palantir’s vision and execution, it may be worth keeping on your watchlist. But I wouldn’t chase this dip just because it’s off the highs. There’s a lot more air that could come out of this balloon.

Let me know what you think — are you buying the dip on Palantir, or staying on the sidelines?

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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