Palantir shares dropped 3.5% in premarket trading Tuesday, extending Monday's decline.
Palantir, which is preparing to join the Nasdaq 100, is down Monday. One analyst cited holiday profit-taking after another counseled caution on chasing the hot AI stock.
Palantir stock once shed more than 6% on Monday trading, but recovered later in the session. The stock dipped a fraction to close at 75.75 after Nasdaq Inc. said the shares will be added to the Nasdaq 100 before the market opens Dec. 23.
Palantir has been on a roll this year, propelled by its strong position in the defense market and AI.
Palantir stock has soared more than 300% year to date.
"Honestly, I can't think of any reasons," for the stock's decline, Anshel Sag, principal analyst with Moor Insights & Strategy, said "Maybe some profit-taking before the end of the year?"
Last week, Baird analyst William Power also warned against chasing Palantir stock gains, noting the shares have outpaced the S&P 500 big time, "suggesting high expectations, though we also acknowledge the strong, accelerating operating momentum."
While Palantir's outlook remains strong, the stock is seriously extended, up more than 160% from its buy point, according to IBD MarketSurge. Shares are 104% above their 200-day moving average. Stocks trading more than 70% to 100% above their 200-day lines are often at risk of pulling back to consolidate those gains.