Why Palantir Stock Is Plummeting Today

Shares of Palantir Technologies (NASDAQ: PLTR) are plummeting on Monday. The company's stock lost 11.1% as of 2:20 p.m. ET and was down as much as 12% earlier in the day. The drop comes amid broader market weakness, with the S&P 500 down 2.8% and the Nasdaq Composite down 4.2%.

The artificial intelligence (AI) and big data company is being hit by growing recession fears and comments by President Donald Trump.

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Recession worries intensify

Concerns about an economic downturn escalated following comments Trump made during an appearance on Fox News' Sunday Morning Futures. When asked about the possibility of a recession, Trump responded, "I hate to predict things like that," adding: "There is a period of transition, because what we're doing is very big. We're bringing wealth back to America."

The remarks did little to ease a fear that has permeated the market. Continued uncertainty in the face of trade tensions with America's largest trade partners, a shifting geopolitical landscape, as well as a possible government shutdown are putting pressure on stocks.

Valuation questions persist

Palantir's stock is especially volatile because it carries a hefty premium. Investors are willing to pay that premium based on the promise of outsize future returns, so when uncertainty arises, its stock is especially vulnerable.

To put it lightly, the premium is not a small one. Even after its stock price has fallen 40%, its current price-to-earnings ratio (P/E) is nearly 450 -- an astronomical figure. I would avoid Palantir for now; its stock is just too expensive.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.