AI software firm Palantir saw strong quarterly revenue, but its price-to-earnings ratio could be a warning sign for investors.

Palantir shares have fallen nearly 20% over the past two days following a large post Q2 earnings rally earlier this month. Learn more on PLTR stock here.

In recent days, Palantir's stock has been showing signs of slowing down. After hitting a new all-time high of $190 on Aug. 12, it has proceeded to trade lower. By Monday, the AI stock would close at just over $174 -- down 8% from its recent high.

Palantir Technologies on Monday raised its annual revenue forecast for the second time this year, expecting sustained demand for its AI-linked services from businesses and governments.

Palantir Technologies Inc. (NASDAQ: PLTR) is one the AI Stocks Analysts Are Watching Closely . On August 18, Palantir stock received a cautious mention from Citron regarding the company’s stock valuation, marking the second time the firm has raised concerns.

Palantir's growth continues to be led by U.S. commercial customers adopting its Artificial Intelligence Platform (AIP). The company once again credited AIP's ontology, saying it is "pure understanding," and that without it, large language models (LLMs) cannot actually work in the real world

Palantir Technologies was the worst performer in the S&P 500 on Tuesday, with the stock continuing to surrender gains following a blowout earnings report earlier this month.

The 2025 stock market saw Palantir, at its peak, up more than 150% and leading the S&P 500. Major hyperscaler Oracle ORCL ran up 57%, while Nvidia stock's gain topped just short of 57%. Microsoft stock peaked in July with a 32% gain.

Andrew Left argues that investors have overhyped Palantir stock, and its valuation pales in comparison to a true AI leader like OpenAI.