On Thursday, investors continued to sell off shares of Palantir, raising worries that the latest favorite among retail investors might be losing momentum.

Palantir’s stock fell over 12% on Thursday, marking one of its most substantial declines since May. This decline followed a roughly 10% drop on Wednesday, which occurred after the stock reached an all-time high earlier in the day. This downturn could potentially mark the first instance of consecutive losses exceeding 10% in the company’s history.

The initial decline on Wednesday was triggered by investors focusing on the CEO’s newly announced stock sale plan and comments from Defense Secretary Pete Hegseth regarding potential cuts to defense budgets.

This ongoing decrease raises concerns that what was once a retail investor favorite may be running out of steam. The stock had previously surged due to excitement surrounding artificial intelligence and was among the top performers in the S&P 500 last year.

Recent data indicates that Palantir has ranked highly among the choices of retail investors. The firm actively engages with this demographic, having executives like CEO Alex Karp connect directly with them during earnings calls and video messages.

Research from Vanda suggests that Palantir attracted more retail investor inflows than all but a few stocks, including Nvidia, Tesla, and the SPDR S&P 500 ETF Trust (SPY), according to 2025 figures leading up to early February. Notably, over the past week, Palantir was among the top stocks purchased by individual investors, as reported by JPMorgan on Wednesday.

In recent months, Palantir has cultivated a strong following among retail investors. The company’s shares surged by more than 60% in November as investors began to speculate on which companies would gain from a potential return of President Donald Trump.

Additionally, Peter Thiel, co-founder of PayPal alongside Elon Musk, has chaired Palantir’s board for over twenty years. Musk has been advocating for reduced government spending, and there is speculation that he might utilize Palantir’s technology to support these efforts.

However, some market participants are expressing caution regarding the company’s valuation. The stock trades at a forward price-to-earnings ratio of 194, significantly higher than the S&P 500’s average of 22. Despite this, retail investor loyalty may help rationalize this high valuation, as suggested by Gil Luria, head of technology research at D.A. Davidson.

Two key pieces of news appeared to trigger the recent downturn on Wednesday.

According to reports, Hegseth advised Pentagon officials to brace for an annual defense budget cut of 8% over the next five years, raising concerns about the potential impact on business dealings between the government and contractors like Palantir. Nevertheless, Palantir executives have previously expressed optimism about the company’s value to the new Department of Government Efficiency.

Additionally, a regulatory filing on Tuesday revealed that CEO Karp is authorized to sell up to 10 million shares of the company over the next six months. Karp’s unique personality, often likened to that of Tesla‘s Elon Musk, plays a significant role in attracting attention from retail investors.

With these setbacks, the stock has experienced a 16% decline this week. However, it remains up over 32% in 2025 after a phenomenal increase of around 340% the previous year.

While individual investors have been flocking to this stock, sentiment on Wall Street is less favorable. The consensus among analysts from LSEG indicates a hold rating, with price targets suggesting a potential decrease in share value.