• Palantir stock is gaining ground as the tariff situation continues to evolve.

• An investment firm also upgraded its rating on Palantir stock today.

• Palantir's volatility over the last month highlights the high-risk nature of the stock, but the business has huge long-term potential.

Palantir stock rose nearly 7% in Wednesday's trading.

The artificial intelligence (AI) software leader's share price was climbing following news that new 25% tariffs on automobiles imported from Mexico and Canada will be delayed a month. The tariffs could cause major pricing increases on vehicles in the U.S., and were viewed by some economists and industry experts as potentially having a destabilizing impact on the auto market.

While the auto news doesn't impact Palantir directly, it was having an impact on valuations across the broader market as investors are showing signs of relief that one of the most potentially impactful developments from new tariff policies is being pushed further out and may get resolved before going into effect.

In addition to developments on the tariff front, Palantir stock also seems to have gotten a lift from analyst coverage. William Blair published coverage on the company and upgraded its rating on the stock from underperform to market perform. The firm's analysts said they still think Palantir's heavily forward-looking valuation creates big downside risk, but they believe that shares are more reasonably valued on the heels of sell-offs that have taken place over the last month.

Is Palantir stock a buy right now?

Following an impressive rally last year, Palantir stock has been highly volatile in 2025. While the company's share price is still up 18% across this year's trading, it's also down 28.5% from its high mark even after today's gains.

In addition to macroeconomic and geopolitical volatility, Palantir stock has seen some downward pressures as investors struggle with how to value the business and assess its long-term opportunity. Despite some big sell-offs over the last month, Palantir is still valued at approximately 160 times this year's expected earnings and 55 times expected sales.

Palantir has an extremely growth-dependent valuation -- and one that sets the stage for significant downside risk if business performance comes in below expectations or macro conditions worsen significantly. On the other hand, the company has a clear leadership position in areas of the AI software market that are poised for massive long-term growth. For long-term investors, I think that taking a buy-and-hold approach to Palantir stock at today's prices will be a winning move despite volatility.