Palantir Technologies Inc. was the latest tech stock to skyrocket. While the party looks as if it is over, there is still time to sell for those who haven't already.

Barron's argued on Wednesday that it was time to sell, citing concerns the stock's sky-high valuation and the potential for its spectacular growth to slow down. The stock is down about 26% since then, including an 11% decline on Monday.

The main factor behind the slide -- the stock is down for its fourth consecutive session -- is that President Donald Trump's administration has proposed cutting the defense budget by $50 billion annually, or 8% of the current total. Palantir gets just over half of its sales from the government, creating the potential for total revenue to decline by several percent.

Earnings are at risk, even though a reduction in government demand for Palantir's software could allow the company to cut some costs, so it is no surprise that the stock is dropping so harshly. The budget issue is a perfect reason for the many investors who had loaded up on shares to lock in profits by selling.

Coming into the big decline, shares were up almost nineteen-fold since the end of 2022, when companies, including the software provider, were beginning to cash in on their artificial-intelligence capabilities. This year, shares had nearly doubled to $124 from a low point in January, with much of the gain coming after the company turned in surprisingly strong fourth-quarter results. Revenue rose 36% in the quarter, and profit margins exceeded expectations. Earnings were almost 30% higher than analysts had anticipated.

Palantir's latest rally had lifted its valuation to 75 times the $3.75 billion in sales that analysts forecast for this year, according to estimates gathered by FactSet. That valuation left little margin for error -- including the probability that the company's growth rate will slow in coming years. Any financial results short of Palantir's recent, stellar performance likely will reduce the price/sales multiple investors are willing to pay, which could set the stock up for a period of poorer performance.

Lofty valuations are nothing new to tech investors. Since the end of 2022, the tech-heavy Nasdaq Composite has almost doubled, driven primarily by gains in Nvidia, Meta Platforms, Tesla, Amazon.com, Alphabet, and Microsoft. Other tech stocks have also doubled, and then some.

Driving the stock gains has been explosive growth in earnings, as customers pay more to adopt AI technology. Artificial intelligence can make companies more efficient, so the growth trend likely has years to go. The surge in AI spending has been larger than analysts had initially forecast, pumping tech stocks higher.

None of the stocks mentioned above, however, with the exception of Meta, has touched a new high in recent weeks. To the contrary, some have seen significant declines recently. Nvidia is still recovering from a loss of 22% as of its February low.

The issue isn't that tech stocks can't provide high returns over the long term, but that their growth rates -- and those of the hottest tech companies -- may slow. Indeed, analysts forecast that aggregate earnings for Nasdaq companies will slow to 16% annually over the coming two years from 23% this year.

That means their valuations -- or multiples of expected near-term earnings -- likely will remain below prior peaks. Slower growth suggests price gains may be more muted than in the past, even as stocks in a host of other sectors might look a bit more attractive.

Palantir's business isn't suffering. To the contrary, the company is firing on all cylinders, but the good news is in the shares.

Consider the technical picture: As of Wednesday, the stock was trading at 45% above its 50-day moving average, near a record high, and well above the 36% premium reached after a torrid run that ended in December. Historically, Palantir's stock has tended to decline by double digits shortly after reaching new highs above its 50-day average.

Consistent with the technical setup, the valuation has reached extremes. Palantir's market capitalization of $280 billion, also as of Wednesday, implies a price/sales multiple almost eight times higher than the i Shares Expanded Tech-Software Sector exchange-traded fund's price/sales ratio of 9.6. On average between the end of 2022 and mid-January, just before Palantir's most recent surge, Palantir's price/sales multiple was only 2.4 times above the software fund's multiple.

Palantir arguably deserves to trade at a premium to the sector. Consider its fourth-quarter sales growth. Its software, which now incorporates AI, is in high demand. The government uses it to decode national security threats on a centralized platform, while businesses have turned to it to identify opportunities to increase sales and reduce costs.

Sales have been growing faster than the broader big-data analytics market, which is expected to near $1 trillion by the end of the decade, according to Fortune Business Insights. Margins are widening, causing earnings to rise even faster than revenue, because the sales growth has come without much additional marketing and other spending. Investors expect profit growth to remain high for a long time.

But the company's presumed growth prospects don't justify the current valuation.

While analysts anticipate nearly 30% annualized growth in free cash flow over the coming three years, expectations have already slipped slightly. Analysts are estimating 29% annual sales growth for both 2026 and 2027, a couple of percentage points below this year's estimate. Free cash flow grew more than 40% annually from 2021, Palantir's first profitable year, to 2024.

The deceleration in growth is a natural part of a growth company's life cycle, and is occurring at other software companies as AI adoption plays out. The software fund is expected to see earnings growth decelerate over the next few years, after 2025.

Investor enthusiasm for Palantir isn't universal on Wall Street. Deutsche Bank analyst Brad Zelnick rates the stock Sell and has a $50 price target, which represents a price/sales multiple of roughly 26 times, closer to three times the multiple for the software group, and more in line with the stock's history. Zelnick's sales estimates don't deviate much from the consensus view, but he assumes Palantir will command a much lower price/sales multiple over time, and has written that "the valuation more than fully reflects impressive momentum monetizing Generative AI."

Mizuho analyst Gregg Moskowitz likewise wrote, "We find it exceedingly difficult to justify PLTR's multiple." He rates the stock Underperform, with a price target of $80, similarly reflecting a lower price/sales multiple.

Assuming Palantir's cash-flow growth slows to, say, a still-sturdy 20% a year for the next decade, and that its growth rate thereafter is greater than that of the average public company, its market value seems unlikely to match or exceed current levels. Using a discount rate of 11.5%, in line with that used by many Wall Street analysts, Barron's calculates the company's market cap under this scenario would be close to $125 billion.

There's nothing wrong with selling, especially after this year's sizzling rally. It seems wise to take the money.