When a stock rallies sharply, is a downward correction inevitable? That’s the billion-dollar question for anyone who owns or is considering buying Palantir Technologies (NASDAQ:PLTR) stock.
An argument can be made that Palantir shares are overvalued. As we’ll discover, PLTR stock may appear to be stretched to the upside. Moreover, a commonly cited metric seems to suggest that Palantir Technologies is very richly valued.
One might even conclude that Palantir stock is about to crash and will decline to $100 in 2026. Before you panic-sell your shares, though, be sure to consider both sides of the argument as Palantir Technologies might not actually be overvalued.
An Unforgettable Year
It’s not an exaggeration to say that artificial intelligence (AI) and cyber-defense technology provider Palantir is a darling of the market. As we near the end of 2025, PLTR stock is up by roughly 148% year-to-date.
Beyond the price action of the stock, 2025 has been stellar for Palantir Technologies. Just in the month of December, Palantir inked potentially lucrative deals associated with the U.S. Army and, separately, with the U.S. Navy.
Those are just a couple of recent examples demonstrating Palantir’s status as a go-to public-sector provider of AI and threat detection services. I could also list Palantir’s multitude of private-sector deals, but that would take up a lot of space.
Too High, Too Fast?
Even as Palantir Technologies establishes itself as an unstoppable dealmaker, not all investors are ready to buy Palantir shares. Indeed, some skeptics may contend that the efficient market has already priced in Palantir’s current and future success.
The bearish argument would be that, after a nearly 150% rally in 2025, PLTR stock can’t possibly sustain its uptrend. Therefore, a deep decline to $100 next year would be a logical outcome.
Along with that, it could be argued that Palantir Technologies’ valuation is too high. On a trailing 12-month basis, Palantir’s price-to-earnings (P/E) ratio is 427.07x, which appears to be quite elevated.
In other words, if you’re a contrarian investor or a value seeker, it might seem reasonable to expect PLTR stock to crash to $100. After a blistering 2025, gravity has to take effect in 2026, right?
Additionally, there are concerns that the AI technology market is a bubble that’s about to burst. If that’s the case, then it would be wise to steer clear of Palantir Technologies stock.
Results Speak for Themselves
Is it reasonable to compare Palantir and other AI-focused companies to a failed businesses like Pets.com? That dot-com company may have been too richly valued, but it didn’t have the public and private sector deals that Palantir Technologies has.
Besides, unlike some of the failed dot-com startups, Palantir is a proven revenue and income grower. We can support this contention by glancing at Palantir’s third-quarter 2025 financial results.
Impressively, the company’s revenue expanded 63% year over year and 18% quarter over quarter to $1.181 billion. Zeroing in on the public sector, Palantir’s U.S. government revenue increased 52% year over year and 14% quarter over quarter to $486 million.
Again, dealmaking has been crucial to Palantir’s success. In just Q3 2025, the company closed a mind-blowing 204 deals of at least $1 million.
If there are signs of an AI bubble bursting, they won’t be found in Palantir Technologies’ recent results. Unlike Pets.com, Palantir can back up its market darling status with real, robust profits.
As the old saying goes, the numbers don’t lie. In the third quarter of 2025, Palantir Technologies’ net income totaled $476.748 billion; that’s 219% growth compared to $149.341 billion in the year-earlier quarter.
Must There Be a Crash?
On the surface, the bearish arguments make perfect sense. Palantir Technologies stock ought to pull back in 2026 after a monster rally in 2025, especially when the company’s P/E ratio is sky-high.
At the same time, Palantir is a superior dealmaker and the company’s contracts could prove to be major moneymakers. Government contracts, in particular, could keep Palantir Technologies profitable for a long time to come.
Furthermore, Palantir’s revenue and income growth rates may justify Palantir’s elevated valuation, at least for now. Until Palantir Technologies financially starts to resemble Pets.com, any fears of an imminent share-price collapse are probably overblown.
So, while it’s possible that PLTR stock could collapse to $100 next year, this is a highly unlikely scenario. All in all, betting against Palantir stock in 2026 is a dangerous move and trying to predict an AI bubble burst could be hazardous to your financial well-being.
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