Agentic AI is coming in 2025. In the first few days of the year, AI agents became a popular investing buzzword and represent the next iteration of AI applications. With some of the biggest AI players going all-in on this technology, it might make existing AI powerhouses, like Palantir (PLTR -1.42%), a bit nervous.
Could this technology knock Palantir off of its perch as one of the top AI investments? The answer may surprise you.
Palantir already has an agentic AI platform
Palantir emerged as one of the best pure-play AI investments in 2024. The stock had a phenomenal year, going up 340%. However, 2025 hasn't been so kind to Palantir stock, as it has plummeted 10% to start the year.
Palantir became a hot stock as it continuously posted strong growth quarter after quarter. This is because it is a long-established player in this field.
Palantir started selling its AI software to government entities, giving those with decision-making authority the tools they needed to make the most well-informed decision when time is critical. This use case spread throughout government branches and eventually made its way to the commercial side. While government spending still accounts for most of Palantir's revenue, commercial clients are growing the quickest.
Part of the reason commercial is growing quicker is the rapid adoption of Palantir's Artificial Intelligence Platform, often called AIP. AIP allows AI models to be integrated within a system rather than being used as a chat on the side. AIP also has tools to automate some workflows within the application, which is essentially what AI agents do.
This is a key point in the Palantir investing thesis: It was already doing what others are getting excited about now. This gives Palantir a leg up on the competition and bodes well for Palantir's future.
But there's one problem.
Palantir's stock is so expensive future price appreciation may be limited
While I'd consider Palantir a leader in the AI space and a clear innovator, the stock has already baked in a massive rise. Despite the stock price falling 10% to start 2025, the stock is still incredibly expensive from a valuation perspective.
PLTR PS Ratio data by YCharts
Palantir's stock trades for an unbelievable 62 times sales and 143 times forward earnings. This indicates that significant growth is already baked into the stock, and Palantir will have to grow rapidly to make these valuations worth it.
However, Palantir isn't putting up the growth it needs to justify these stock prices.
As mentioned above, Palantir is growing quickly, but its Q3 revenue only rose 30% year over year. While that indicates strong growth in a vacuum, the stock valuation indicates a company that should be doubling or tripling its revenue year over year. With Wall Street analysts projecting that Palntir's growth will slow in 2025 to a 25% growth pace, that's a huge problem for the stock.
So, what should investors do with Palantir's stock? There is still a long way for the stock to fall before investors consider scooping shares back up again. While Palantir is still at the forefront of innovative AI implementation, the stock has already priced that in and then some. There are much more attractive agentic AI investments to make right now, and I think investors would be better off turning their attention to those stocks than risk a lot with Palantir's high valuation.
