Is Palantir Going to Plunge 50% (or More)? History Offers a Blunt Answer.

Market Performance and Trends - The stock market has seen exceptional performance in 2023, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite rising by 16%, 27%, and 33% year-to-date, respectively [2] - The AI revolution has been a major driver of the stock market's two-year ascent, with AI's ability to improve over time and learn new skills expected to create a $15.7 trillion addressable market by 2030 [3][4] Palantir Technologies Overview - Palantir's stock has surged 343% year-to-date and 935% over the trailing two-year period, outperforming major stock indexes [5] - The company's unique positioning and irreplaceability at scale have driven investor excitement, with its Gotham and Foundry platforms being key differentiators [7][8][9] - Palantir's Gotham platform, focused on government contracts, has been instrumental in achieving recurring profitability, with steady double-digit sales growth [10] - The Foundry platform, aimed at enterprises, is in its early growth stages, with a 51% year-over-year increase in commercial customers to 498 in the latest quarter [11] Financial and Valuation Insights - Palantir ended Q3 with $4.6 billion in cash, cash equivalents, and U.S. Treasuries, with no debt, providing financial flexibility and potential for shareholder rewards [12] - The company's trailing-12-month price-to-sales (P/S) ratio of over 69 is historically high, exceeding even market leaders like Amazon and Cisco Systems during the dot-com bubble [17][18] - Palantir's valuation premium is supported by its AI integration, recurring GAAP profits, and irreplaceability, but historical trends suggest potential for significant declines in stock value [21] Growth and Market Challenges - Palantir's Gotham platform faces a natural growth ceiling due to its limited availability to the U.S. government and allies, placing future profit growth reliance on Foundry [19][20] - Historical patterns indicate that market leaders in next-big-thing trends often experience significant value declines, with losses ranging from 80% to 99% peak-to-trough [15][16] - Despite its strong position, Palantir's valuation and historical precedents suggest potential for a halving or larger decline in stock value, consistent with past trends in innovative technologies [21]