Palantir Technologies (NASDAQ:PLTR) emerged virtually unscathed from the artificial intelligence sector bloodbath on Monday following the DeepSeek release. Although it dropped 4% in sympathy with much of the rest of the AI industry, it quickly rebounded and trades above where it closed out last week. 

Yet with its stock up 387% over the past 12 months, Wall Street believes 2025 is the year for a reset. Analysts have a hold rating on the stock and have assigned a one-year consensus price target of $49.24 per share, implying they see downside risk of 38.62% to where it currently trades.

Now what 

The AI data analytics stock has been called “the best pure play AI name” because of its ability to monetize the technology in both the public and private sectors. Business in both is hot.

Government revenue grew 40% to $320 million in the third quarter while commercial revenue shot 54% higher to $179 million. Overall, revenue was up 30% as it adds more customers. The number of Palantir customers increased 38% last quarter and was 6% higher sequentially, with 104 deals worth over $1 million.

Having turned profitable in 2023, earnings also continue to grow as GAAP earnings doubled to $0.06 per share last quarter. CEO Alex Karp said, “We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down.”

Palantir expects more of the same in the fourth quarter. With earnings due out on Feb. 3, management is guiding revenue to a range of $767 million to $771 million producing adjusted operating earnings between $298 million and $302 million. For the full year, it raised its revenue guidance to between $2.805 to $2.809 billion with adjusted income from operations between $1.054 billion $1.058 billion.

What’s next

Wall Street is also seemingly bullish with its outlook for the full year calling for revenue to jump 29% to $2.87 billion and for profits to surge over 330% to $0.39 per share. 

So why the hold rating and the expectation for the stock to fall nearly 40%? In a word, valuation.

Palantir Technologies had a monster year 2024, especially after the November elections. Not only does the AI shop have friends in high places with founder Peter Thiel and early investor David Sachs having President Trump’s ear, but the administration is expected to be much much friendlier toward AI technology than the Biden administration was.

The valuation has simply gotten ahead of itself. JPMorgan analyst Sanjit Singh told investors in a note, “Palantir has evolved as a top partner for quick AI implementation, but the trading levels of the company are considerably higher than the company’s intrinsic value.”

Although Palantir Technologies’ business is growing, sales growth rates are slowing. Moreover, while profits are growing, most are derived from the cash on its balance sheet in terms of interest income. Its operations are lagging. 

It has numerous tailwinds behind it, but more than a few headwinds that could impede its progress even if PLTR stock doesn’t crash the way Wall Street thinks. 

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