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If one tech stock has done an excellent job thriving in a highly competitive market and an increasingly complicated technology, it is Palantir Technologies (PLTR) .
Some of the market’s most prominent artificial intelligence (AI) stocks have struggled lately, primarily due to President Donald Trump's tariffs. But while market leaders such as Nvidia have struggled, Palantir has been more resilient.
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While many big tech stocks remain in the red for the month, Palantir is up more than 22%. For investors worried about the AI bubble running out of air this year, its performance may be reassuring.
However, despite its progress, Palantir isn’t necessarily a favorite among every Wall Street analyst. One bank recently reevaluated its Palantir price target, highlighting a concerning question for software companies.
Most analysts are not caught up in the Palantir hype
Before the AI revolution in 2022, most analysts didn’t pay much attention to Palantir. Even though it had been founded by Peter Thiel, who had previously launched the highly successful PayPal, most experts focused on other tech stocks.
Nowadays, Palantir has established itself as an AI leader with an apparent ability to withstand highly volatile market conditions. But even as it outperforms many sector leaders, analysts are still cautiously approaching it, highlighting concerns that its growth may not be sustainable.
Related: Veteran trader revisits Palantir stock price target after NATO deal
UBS analysts recently examined Palantir, opting to maintain a neutral rating and a bearish price target of $105. Palantir's stock price is currently about $112.
The investment bank’s team noted that while the company’s fundamentals appear resilient, looming decreases in government spending pose a potential headwind that could severely compromise its growth.
Some experts have speculated that Palantir is uniquely positioned to benefit from Trump’s presidency, given Thiel’s connections to him and Elon Musk.
The company recently announced a $30 million contract to build tracking software for Immigration and Customs Enforcement (ICE), a decision that has drawn criticism from some members of the tech community.
Despite these positive prospects, Karl Keirstead and the rest of UBS’ analyst team see substantial risk for Palantir, prompting them to reassess their take on the company before it reports earnings for Q1 2025 on May 5, 2025, specifically from further DOGE cuts.
“About 55% of Palantir’s revenue comes from government contracts, and 75% of that is from the U.S., which exposes it to federal budget cuts like those pushed by Elon Musk’s Department of Government Efficiency,” reports TipRanks. “UBS noted that even though Palantir could benefit long-term from being a key AI and software partner for the government, in the near term, these changes could hurt revenue.”