For a while, it seemed Palantir Technologies (PLTR -7.79%) could do no wrong, with the stock gaining as much as 1,250% the past two years. Then, investor sentiment took a turn for the worse. The stock plunged as much as 11.9% on Monday. As of 1:38 p.m. ET, the stock was still down 8.1%.

In all, the artificial intelligence (AI) software and data mining specialist has lost roughly 25% over the past five days since reaching a new all-time high early last week. After such a precipitous drop, is it finally time to buy the stock? 

When it rains, it pours

A couple of factors are weighing on Palantir stock. The company revealed in a regulatory filing that CEO Alex Karp planned to sell 9,975,000 shares of stock using a 10b5-1 trading plan, liquidating the shares by September. On the day before the decline began, this stock sale would have netted as much as $1.24 billion. Given that much of Karp's pay comes in the form of stock-based compensation, it isn't particularly surprising or troubling that he would be selling off some shares.

More critical are reports that Defense Secretary Pete Hegseth has told senior military officials that he plans to cut defense spending by 8% annually the next five years. If those plans happen, investors fear that could jeopardize a key contributor to Palantir's growth, as the company has been a major supplier of data mining and AI systems to U.S. intelligence and defense agencies.

Screaming buy or falling knife?

There's no clear consensus on Wall Street when it comes to Palantir. Four analysts who cover the company rate it a buy or strong buy, 14 rate it a hold, and five label it underperform or sell.

There's no denying the significant opportunity that AI represents for Palantir. Even after its precipitous decline, the stock is still selling for 167 times next year's expected earnings. Since the stock is still wildly overvalued, volatility will remain, and investors should exercise caution. For those who want to buy, Palantir might be a good candidate for dollar-cost averaging.