Shares of Palantir Technologies (NYSE:PLTR) faced a notable decline today, plummeting 11.6% in early trading amid a broader market downturn following disappointing economic data. The S&P 500 fell by 1.7% and the Nasdaq decreased by 2.2% as PMI figures indicated a contraction in the U.S. services sector, coupled with lower-than-expected consumer sentiment reported by the University of Michigan.
Market anxieties were further exacerbated by reports suggesting Microsoft is adjusting its data center projections, leading to speculation that AI-related investments might be overly excessive. TD Cowen analyst Michael Elias identified key findings indicating that Microsoft has cancelled leases for substantial power capacity with at least two data center operators and has shifted a considerable portion of its international spending back to the U.S. However, Jefferies analysts emphasized that this should be interpreted as a regional adjustment rather than a fundamental change in Microsoft’s data center strategy, as executives strongly refuted claims of a significant shift.
Investors are now closely monitoring Nvidia’s upcoming earnings report, which is anticipated to provide insights into AI infrastructure demand. The forthcoming Q4 2024 results will be examined for evidence regarding the sustainability of AI spending.
Palantir, known for being the most “expensive stock in the S&P 500”, faces increased scrutiny as CEO Alex Karp has proposed a new stock plan that could raise the share count and potentially dilute existing shareholders. This uncertainty contributes to a challenging environment for investors, who are now bracing for heightened volatility.
The share price closed at $90.67, reflecting a 10.5% decrease from the previous close. Historically, Palantir has experienced significant volatility with over 30 price movements greater than 5% in the last year, underlining the impact this news has had on market sentiment regarding the company.
In light of this market reaction, while the situation appears daunting, significant drops like these can present strategic opportunities for discerning investors willing to navigate volatility for potential long-term gains.