Nasdaq and Palantir See Sharp Declines Amid AI Boom Concerns
New York, Tuesday, 4 November 2025.
Despite Palantir’s strong earnings, its stock dropped over 7% amid broader Nasdaq declines, raising concerns over the sustainability of AI-driven market valuations.
Palantir’s Earnings and Market Reaction
Palantir Technologies Inc. recently reported its third-quarter 2025 earnings, showcasing a revenue surge of 63% year-over-year, reaching nearly $1.2 billion. This performance exceeded analysts’ expectations, with U.S. commercial sales jumping 121% [1][2]. Despite these robust results, Palantir’s stock experienced a decline of over 7% in pre-market trading, reflecting broader market concerns about the AI sector’s valuation sustainability [1][3].
Nasdaq’s Broader Decline
The Nasdaq Composite Index also faced a significant decline, dropping by 1.91% as investors exhibited caution towards tech stocks heavily reliant on AI advancements [2]. This downturn was not isolated to Palantir, as other major tech companies like AMD and Nvidia also saw their stock prices fall by 2.98% and 3.72%, respectively [3]. This collective movement suggests a growing investor sentiment that current valuations may not be justified by future earnings potential [4].
Concerns Over AI Market Valuations
The selloff in tech stocks, particularly those associated with AI, highlights a critical market dynamic where high valuations are increasingly questioned [4]. Analysts emphasize that while the AI boom has driven significant market gains, there is a palpable fear that these valuations might not be sustainable in the long term. The forward price-to-earnings ratio for Palantir is around 240x, which raises red flags for investors wary of speculative bubbles [3][4].
Impact on the Broader Economy
The implications of this tech selloff extend beyond individual stock performances, touching on broader economic concerns. As major indices like the S&P 500 and Dow Jones also recorded losses, with declines of 1.17% and 0.65% respectively, the potential for a market correction looms large [2][3]. Banking executives, including those from Morgan Stanley and Goldman Sachs, have expressed caution, suggesting a possible drawdown of 10–20% within the next 12–24 months [3][4]. The overarching concern is that the tech sector’s overvaluation could precipitate a wider economic impact, especially if AI-driven expectations fail to materialize as projected [4].