Palantir Technologies (PLTR), one of the hottest names in artificial intelligence (AI), has been flat for a while, down more than 2% over the past month.

The stock surged 135% in 2025 and 340% in 2024, driven by surging demand for its AI software and record revenue growth. 

Palantir develops data analytics and AI software platforms, including Gotham, Foundry, Apollo, and Palantir Artificial Intelligence Platform, helping organizations analyze complex data.

The stock has soared nearly 3,000% over the past three years. Investors are increasingly wary of Palantir’s valuation and potential downside, but one recent analyst note suggests the market may still be underestimating the upside.

Palantir stock gained 135% in 2025.

Why did Palantir stock fly?

gettyimages Palantir’s momentum has been fueled partly by soaring demand from the U.S. government, especially military agencies. More than half its U.S. revenue comes from the government segment.

In July 2025, Palantir was awarded a deal worth up to $10 billion with the U.S. Army. But the company doesn’t rely only on the U.S. government. Its commercial clients include Airbus, Morgan Stanley, and Merck KGaA.

Demand from those clients is so strong that Palantir repeatedly raised its financial outlook in 2025.

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On November 3, Palantir stock reached an all-time high, closing at $207.52 after the company reported a strong third quarter. 

The company posted $1.18 billion in revenue, up 63% from a year earlier, with U.S. commercial sales jumping 121% to $397 million. Adjusted earnings came in at 21 cents a share, beating analysts’ estimate of 17 cents.

Palantir will report its fourth-quarter earnings in early February, and market expectations are running high after a string of strong results. 

But even if Palantir reports another solid quarter, Wall Street will see whether the results are strong enough to justify the stock’s roughly 245 times forward earnings multiple. 

Citi upgrades Palantir stock, raising price target to $235

As investors debate whether Palantir’s rally has pushed risk too far, Citi just sent a bullish note.

The firm upgraded Palantir to buy from neutral and raised its price target to $235 from $210.

“Our upgrade is premised on our view that 2026 is poised to be another year of significant positive estimate revisions,” Citi analysts led by Tyler Radke wrote in a Jan. 12 note sent to TheStreet, citing accelerating AI budget and use cases in the enterprise.

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Citi said Palantir’s impressive growth acceleration and margin expansion have broken the traditional valuation rules.

“With the company printing over 250% year-over-year adjusted RDV (Remaining Deal Value) growth in the third quarter, we see a path to an upside case of roughly 70% to 80% total revenue growth in 2026,” the analysts wrote.

Citi estimates Palantir’s fiscal 2026 government revenue growth at 51% year over year, with a bullish case of over 70%. 

“This is driven by our view of a ramping defense super cycle and possible tailwinds from lapping the 2025 government shutdown and international (U.S. allies) modernization,” the analyst said.

Palantir closed at $179.41 on Jan. 12. Wall Street has an average price target of about $192.88 for Palantir stock, according to data from TipRanks. 

Major investors are selling Palantir shares

Several major investors have been trimming their Palantir stakes as the stock rallied.

Stanley Druckenmiller, one of the world’s most closely followed investors, reduced and eventually exited 769,965 shares of Palantir between mid-2024 and March 2025 through Duquesne Family Office.

Cathie Wood, CEO of Ark Invest, has also been trimming her Palantir exposure, selling roughly 9 million shares over the five quarters from Q3 2024 through Q3 2025, according to data from Stockcircle.

But Palantir remains one of Wood’s largest positions, accounting for about 3.6% of the flagship Ark Innovation ETF (ARKK) and ranking ninth in the portfolio.

“Palantir is a very expensive stock, but there’s nothing like it in the software space,” Wood said in a CNBC interview in February 2025. “It is, we believe, going to dominate the biggest part of the tech stack when it comes to AI. And that’s the platform as a service part of the stack.”

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