Tesla (TSLA) and Palantir (PLTR), once high-flying stars of the stock market, have seen their values take a hit in recent months. Palantir’s stock has dropped more than 30% from its recent peak of $125.41. Meanwhile, Tesla has declined even more sharply, losing 46.3% from its 52-week high. Notably, Tesla stock has fallen about 35% this year alone.

The recent pullback has alleviated some concerns regarding their high valuations. Moreover, the drop may seem like an opportunity to buy these high-growth stocks at a discount. After all, both companies remain industry leaders. Tesla dominates the electric vehicle (EV) market, while Palantir continues expanding its influence in AI-driven data analytics. Let’s take a closer look at TSLA and PLTR stock to determine whether now is an opportunity to buy.

Should You Buy the Dip in Tesla Stock? 

Tesla (TSLA) is navigating a challenging period as CEO Elon Musk’s political activities, heightened competition, and macroeconomic uncertainty weigh on the company’s performance. The automaker’s Q1 deliveries missed expectations following its first-ever annual delivery decline. Despite aggressive price cuts, Tesla has struggled to drive volumes. However, several catalysts could pave the way for a strong rebound.

A key factor in Tesla’s recovery could be the launch of its highly anticipated affordable EV in the first half of the year. This model could expand Tesla’s market reach, reviving sales momentum and strengthening its leadership in the EV space.

Tesla’s advancements in Full Self-Driving (FSD) technology also present another major opportunity. The company plans to roll out supervised FSD in Europe and China later in 2025, with Musk expressing confidence in achieving widespread U.S. adoption as early as next year. A regulatory shift in North America could further accelerate this progress, solidifying Tesla’s dominance in autonomous driving.

Tesla is also moving forward with its Robotaxi service, which will launch in select U.S. markets later this year. If successful, this venture could open a massive new revenue stream. Beyond transportation, the company’s humanoid robotics project, Optimus, is poised to transform labor efficiency, with initial deliveries expected by 2026.

Meanwhile, Tesla’s energy division continues to grow, bolstering profitability. 

Tesla's long-term outlook is strong, but short-term uncertainties remain, especially due to Elon Musk’s role in the Department of Government Efficiency. Wall Street is taking a cautious stance, with analysts maintaining a “Hold” consensus rating. Even after the recent dip, Tesla’s forward price-earnings ratio is still high at 115.8x, making the stock less appealing.

Should You Buy the Dip in Palantir Stock? 

Palantir (PLTR) stock has also taken a hit recently, largely due to concerns over its high valuation and uncertainty surrounding its government revenue stream. The Trump administration has proposed cutting defense spending. This move could significantly impact Palantir’s business since a large portion of its revenue comes from government contracts.

Palantir has been delivering strong growth, with its revenue accelerating in recent quarters. The driving force behind this momentum is the rising demand for artificial intelligence (AI) solutions, a space where Palantir is rapidly establishing itself as a key player. However, the potential slowdown in defense spending raises questions about the company’s long-term reliance on government deals.

To mitigate this risk, Palantir is aggressively expanding its commercial business. Its Artificial Intelligence Platform (AIP) is gaining traction with private-sector customers, leading to deeper partnerships and a growing revenue stream. The company expects U.S. commercial revenue to climb another 54% in 2025, reaching $1.079 billion. While this expansion is encouraging, it remains to be seen whether the commercial side of the business can fully compensate for any decline in government-related revenue.

Another challenge facing Palantir is its steep valuation. Even after the recent pullback, the stock trades at a price-sales ratio of 69.3x, which is significantly higher than most of its software peers. Its price-earnings multiple is also sky-high at 260.1x based on forward earnings. Such lofty valuations leave little room for error — if growth slows, the stock could face further downward pressure.

Wall Street analysts are taking a cautious approach and maintaining a “Hold” on PLTR stock.

Bottom Line: Is It Time to Buy?

Tesla and Palantir are both experiencing volatility, but their long-term growth potential remains intact.

However, valuation concerns linger for both stocks, with analysts remaining sidelined. Together, this indicates that it may not be the right time to buy Tesla and Palantir stock on the dip.