Palantir slides 6.6% as software rally bypasses AI darling

The S&P 500 edged higher while the Nasdaq slipped 0.2% as investors rotated out of chip stocks into oversold enterprise software names.

"The rotation reflects money leaving crowded AI-infrastructure trades and recycling into application-layer software that has already reset," said Matt Stucky, portfolio manager at Northwestern Mutual.

Palantir fell 6.6%, extending its year-to-date decline to 27%, even as Salesforce gained 4.7%, Workday rose 7.6% and Adobe added 4.5%. The iShares Expanded Tech-Software Sector ETF climbed 3.3%, while the VanEck Semiconductor ETF dropped 2.3%. Nvidia sank 5.5% after a report it is in talks to guarantee as much as $250 billion in financing for an OpenAI data center project in Ohio.

Palantir's divergence reflects company-specific headwinds: the stock still trades at 68 times forward earnings, down from 170 times in January, and European governments are exploring alternatives to the company's technology. The company reports second-quarter results on Aug. 3.

European Headwinds Weigh on Palantir's Premium

A Bloomberg report on Monday detailed how France, Germany and other European countries are looking to swap Palantir with homegrown providers, prioritizing sovereign control over their technology infrastructure. More than half of Palantir's 2025 revenue came from government contracts, with about 12% from international government clients. Earlier this month, the U.K. announced it was reviewing its National Health Service contract with Palantir, though D.A. Davidson analyst Gil Luria dismissed the concern, noting the NHS contract represents less than 1% of revenue.

The broader software rally had fundamental support. ServiceNow's AI business crossed $1 billion in annual contract value, with agentic deployments up ninefold in nine months. Salesforce reported Agentforce annual recurring revenue of $1.2 billion, up 205% year over year, and announced a $25 billion accelerated share repurchase program. Workday said more than 4,000 customers now use at least one agentic AI product.

Cross-asset moves reinforced the rotation. The 10-year Treasury yield pulled back more than four basis points to about 4.64%, supporting higher-multiple software names. West Texas Intermediate crude plunged 7.8% to $82.30 a barrel after a report that Iran would pause military attacks if the U.S. continued its own pause, easing inflation fears. The U.S. dollar index was near flat at 101.50.

Palantir reports second-quarter earnings on Aug. 3. The stock's forward P/E of 68 times, while down sharply from its January peak, still commands a premium to software peers: Salesforce trades at 22 times forward earnings and Workday at 28 times.

This article is for informational purposes only and does not constitute investment advice.