After a strong postearnings rally in August, Palantir's rich valuation multiple is under pressure once again

Rising global bond yields have placed renewed pressure on high-multiple growth stocks, according to one expert.

Palantir shares have earned a reputation for wild upward surges as well as sharp pullbacks.

Wednesday's price action puts a spotlight on the latter. Palantir's stock (PLTR) has reversed course after a postearnings rebound in August; the stock was down 6% on Wednesday afternoon, making it the third-worst performer in the S&P 500 index SPX.

Palantir's stock was also on track for its largest one-day decline since February of this year, according to Dow Jones Market Data. Since the beginning of the week, the shares have shed 9%.

Valued at 82 times estimated forward earnings, Palantir's stock command an expensive premium. The high multiple has made it susceptible to volatility, as any headline or development can threaten to satisfy a market that has priced the shares to perfection. Palantir's current valuation level has already compressed significantly from its late-2025 peak of over 230 times forward earnings.

"Bond yields went up over the last couple of days, and so I think that can put a damper on some of these higher-multiple stocks," Michael Monaghan, portfolio manager at Founders ETFs, told MarketWatch. Monaghan currently holds a position in Palantir.

Interest rates on government bonds are climbing globally and reaching levels not seen since 2008. Rising bond yields could usher in elevated interest rates, resulting in higher borrowing costs; this can draw capital away from equities and into bonds. High-multiple growth stocks often derive much of their valuation from cash flows expected far in the future, rather than earnings today, and elevated interest rates discount future cash flows more steeply.

Another headwind for Palantir shares could be Alphabet's (GOOGL) (GOOG) Tuesday launch of Gemini 3.8 Flash and Flash Cyber, Monaghan pointed out. Gemini 3.8 Flash Cyber is available through Google's Fairwind Program for government agencies and cybersecurity partners. Some investors may be interpreting that development as a direct challenge to Palantir's government business, Monaghan said.

The recent drop in Palantir shares marks a departure from their performance last month. After hitting a 52-week low of $106.37 in late June, the stock recovered on a strong second-quarter earnings beat that featured robust commercial growth and a raised outlook.

Investors may be skeptical that Palantir can maintain this level of growth in the long term, Monaghan said. The company will need to continue "earning" its valuation by outperforming expectations, he added.

Jefferies analyst Brent Thill expressed such sentiments in a note last month following Palantir's second-quarter earnings results. "We are fundamental fans of [Palantir], but valuation leaves little room for a normalization in growth or execution slippage," Thill wrote.

-Christine Ji