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.
Some analyts believe Palantir CEO Alex Karp is facing a difficult road ahead, despite the company’s recent progress.
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.”
The analysts discussed Palantir’s prospects with six of the company’s customers, spanning private and public sectors. While they agreed that Palantir’s enterprise adoption growth seems to be rising, they also highlighted the possibility of future federal contract awards being delayed as a significant near-term risk.
More Palantir News:
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Gurufocus notes that because of these risks, “UBS lowered its 2025 revenue growth estimate by 200 basis points to 31%, now aligning with Palantir’s own guidance.”
Where will Palantir stock go from here?
UBS’s continued bearish price target on Palantir, despite its continued rise, demonstrates that its analysts see the company’s growth as unsustainable.
The takeaway: The risk of losing federal contracts outweighs Palantir’s progress in other areas.
Related: Elon Musk may be teaming up with Palantir on important project
One potential catalyst on Palantir’s horizon is the prospect of teaming up with Elon Musk’s SpaceX to help work on Trump’s Golden Dome missile defense plan, although no details have been confirmed yet. Joining Musk on such a high-profile project would likely prove a significant growth driver for PLTR stock.
With Palantir set to report earnings next week, investors will be watching closely to see how much progress the company has made over the past quarter.
As Barchart reports, “Analysts expect Palantir to record $0.08 a share of earnings for its first quarter, which would translate to a 100% increase on a year-over-year basis. If PLTR beats estimates on May 5, investors will likely reward it generously in the succeeding sessions.
On the earnings call, Palantir’s leaders will likely provide insight into the company’s future growth plans, but investors will be waiting to hear whether they are concerned about federal defense spending slowing down soon.
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