As one of Wall Street’s most favored artificial intelligence (AI) stocks among retail investors, Palantir Technologies (PLTR) closed Tuesday (August 26) up 2.35% at $160.87. However, RBC Capital analyst Rishi Jaluria recently set a price target of $45, more than 70% below the current share price, making it the most pessimistic forecast on Wall Street. This bearish stance reflects deeper market concerns about valuation bubbles in AI-related stocks.
Overvalued and Divorced from Fundamentals
Jaluria’s core argument is that Palantir’s current valuation has severely deviated from reasonable levels. Even though the company’s Q2 2025 revenue increased 48% year-over-year and U.S. commercial revenue surged 93%, its forward price-to-earnings (P/E) ratio of 250 remains far above healthy industry standards. Jaluria noted that this premium is “unsustainable,” even under optimistic growth scenarios.
A August survey by the London Stock Exchange Group (LSEG) showed that 17 analysts rate the stock as “Hold,” only four give it a “Buy” rating, and another four explicitly recommend reducing or selling positions. This reflects widespread caution among professional institutions about its high valuation.
Commercial Business Still Small, Government Reliance Remains
Despite rapid growth in commercial business (revenue rising from $159 million in Q2 2024 to $306 million in Q2 2025), this segment still accounts for only 30.5% of total revenue, with government business continuing to dominate the income structure.
This dependence creates a dual risk: first, potential government budget cuts could impact core operations, and second, political changes could affect long-term partnerships. Jaluria believes that although the promotion of the AIP platform has achieved significant results, Palantir’s overall growth story is “not yet transformed,” resulting in an unfavorable risk-reward profile.
Since early 2023, Palantir’s stock has surged more than 23-fold, with a year-to-date increase of nearly 100%, making it the best-performing component of the S&P 500 index. Enthusiasm from retail investors has continued to drive the stock higher, but Jaluria warns that such speculation could amplify the magnitude of a future pullback.
Support for High Valuation
Some analysts argue that Palantir’s uniqueness justifies a premium. Mizuho analyst Gregg Moskowitz pointed out that the company’s scarcity in areas such as AI commercialization and government digitization deserves market recognition. The commercial business has maintained quarter-over-quarter growth of more than 20% for multiple consecutive quarters, indicating that its diversification strategy is taking effect. If this momentum can be sustained, the valuation may gradually be digested.
Conclusion: A Balancing Point Amid Divergence
RBC’s extreme bearishness reflects the current market divergence over AI-related stocks. Whether Palantir can support its high valuation depends on whether its commercial business can maintain rapid growth and eventually dominate its revenue structure. In the short term, the focus will be on whether the next quarterly earnings report delivers on promises of accelerated growth; in the long term, the actual profitability of AI commercialization must be validated. Investors should be wary of valuation correction risks but need not be overly pessimistic—Palantir’s unique business model and technological barriers provide a certain degree of downside protection.
