Palantir emerged as the leading stock in both the S&P 500 and Nasdaq-100 during the first half of 2025.
In this period, the S&P 500 and Nasdaq-100 showed total revenue increases of 6% and 8%, respectively. It’s perhaps no surprise that the standout performer was a data analytics firm, Palantir Technologies (pltr -0.53%). Its shares skyrocketed by an impressive 80% in just the first six months of 2025.
With Palantir’s stock gaining traction daily, some investors are beginning to wonder if this AI-focused company might soon become a prime candidate for a stock split in the eyes of Wall Street.
If the company opts for a split, it’s worth exploring how stock splits function and what implications they might have for Palantir’s shares.
What is a stock split and why do firms choose to do them?
The simplest way to grasp stock splitting is through an example.
Imagine a company trading at $100 a share, with a market cap of $100 million, based on 1 million shares outstanding. If the company undertakes a 5-for-1 split, the price per share would drop to $20 while the number of shares would increase to 5 million. It’s crucial to note that stock splits don’t actually alter a company’s market cap; rather, they are a type of financial restructuring.
Typically, stock splits happen after a notable increase in a company’s stock price, which may start to feel steep. This is a critical point to grasp—just because a stock lists at, say, $1,000 per share, doesn’t automatically mean the company is overly valued.
Smart investors often assess ratios like price-to-sales (P/S) and price-to-earnings (P/E), comparing them to similar businesses for a more accurate valuation.
Let’s take a closer look at Palantir’s valuation and consider what might happen if the company does choose to split its stock.
Could Palantir be an ideal candidate for a stock split?
The following analysis examines P/S multiples among various high-growth software companies. Palantir’s P/S ratio has soared to 110, tripling from the previous year. It’s currently about three times more expensive than its nearest rival in the sector.
Given these trends, it seems fair to say Palantir’s stock is on an upward trajectory. Interestingly, investors do argue that the stock is on the pricey side.
Yet, even if the conditions align for a split, does it still make sense for Palantir?
What are the implications if Palantir executes a stock split?
As mentioned earlier, stock splits typically don’t follow significant or prolonged price increases; they tend to happen when shares are perceived as costly. There’s a certain irony here. After a split, the new, lower share prices might feel “cheap” to investors, even though the overall market cap remains unchanged.
It’s common for new investors to start buying in after a split, influenced by the perception of better pricing. However, this influx can drive the stock price back up, ultimately increasing the company’s market cap. In fact, some companies can end up being more “expensive” post-split.
With more investors believing they’re snagging high-demand AI stocks at lower prices, more astute institutional investors might view Palantir’s valuation as likely to climb even higher. This could lead large banks and hedge funds to consider trimming their holdings, prompting unanticipated selling.
For these reasons, I think it would be somewhat counterproductive for Palantir to go through with a stock split.
