Why Palantir’s Pullback Could Be the Next Buy Signal in AI Stocks

Palantir Technologies Inc. (PLTR) is emerging as a key player in the AI space, with its software widely adopted by major corporations and government agencies. After a massive rally, the stock has pulled back, creating a fresh buying opportunity for investors. The business remains strong, driven by rapid growth. The stock has reached the buying zone of $120 to $146.60, and technical charts indicate a potential rebound. This setup could signal the start of the next major upward move in Palantir.

Palantir’s Explosive Growth Reinforces Its Position in AI

Palantir has been one of the most explosive AI stocks since 2023. It surged from over $7 to $190 in less than three years. Investors who bought in early received massive gains. However, the stock has dropped sharply from its record high of $190, bringing Palantir back to a key technical zone.

Palantir’s business remains strong. Its revenue is growing fast, especially in the US commercial segment, which jumped 93% in one year. Its AI software is now widely used by companies and governments. The growth story remains intact, but the stock has experienced a price correction.

Stretched Valuation Meets Strong Growth: A High-Risk, High-Reward Setup

Despite strong AI growth and bullish momentum, Palantir’s current valuation raises red flags. The stock trades at 115 times sales and 243 times forward earnings. These levels are extremely high, even by growth stock standards. The current price already reflects several years of strong growth.

The assumptions needed to justify this valuation are very aggressive. Yet, Wall Street projects only 35% growth for next year. Palantir may still be a strong business, but at these levels, the stock offers limited upside and elevated risk.

Palantir’s high valuation is based on overly optimistic growth expectations. However, the recent correction has shifted the risk-reward balance. The stock has entered a technical accumulation zone that previously acted as strong resistance.

From a trading and investing perspective, this is a classic buy zone setup. Palantir is showing early signs of bottom formation. If the price consolidates in this zone, the likelihood of a confirmed bottom increases.

Palantir Enters a Strong Buy Zone After Sharp Correction

The stock price of Palantir has been trading within an ascending broadening wedge pattern since the strong surge began in August 2024. The stock formed a bullish price structure from 2021 to 2024 before initiating a surge in 2024. This bullish price structure is seen as an inverted head-and-shoulders pattern. That pattern broke to the upside, leading to a rapid rise.

Following the breakout, Palantir surged from around $30 in August 2024 to a record high of $190 in August 2025. This sharp move triggered strong volatility and wide price swings. After reaching the all-time high at $190, the stock corrected sharply in August 2025.

Currently, Palantir is consolidating near the 23.6% Fibonacci retracement level, which sits at $146.60. This level acts as the first support zone. If the price breaks below $146.60, the next key support lies at $120, near the 38.2% retracement level, which also intersects with the lower boundary of the wedge pattern.

This confluence zone between $120 and $146.60 forms a strong long-term buy zone. Any correction within this region is likely to attract buyers and may set the stage for the next surge toward new record highs.

Bullish Patterns and Support Zones Suggest Rebound Is Likely

The daily chart for Palantir shows strong bullish price action. The stock formed a cup pattern in March and April 2024. After breaking out of this pattern, it began trading within an ascending broadening wedge during June, July, and August.

In September, the stock price approached the support line of the wedge and now waits for the next move. It is currently consolidating around the 50-day SMA, suggesting that a breakout or breakdown is imminent.

Palantir faces key support at $146.60. A break below this level may send the price down to the next major support near $120. Notably, the 38.2% Fibonacci retracement level at $120 zone also coincides with the 200-day SMA, adding strength to this support.

The 4-hour chart for Palantir also shows strong price consolidation after a correction from the overbought region. This consolidation suggests the stock is stabilising and preparing for the next move higher. Therefore, investors may consider buying Palantir near the $146.60 level and adding more positions if the stock corrects further toward the $120 support zone.