Palantir stock sinks below a key technical level, extending a steep two-day drop. History suggests buying the dip could pay off—big.

Tech stocks were under pressure this week as Wall Street’s AI enthusiasm slowed and investors adjusted portfolios after a strong summer rally.

Palantir shares have fallen nearly 20% over the past two days following a large post Q2 earnings rally earlier this month. Learn more on PLTR stock here.

Palantir stock (NASDAQ: PLTR) took a sharp hit on Wednesday, falling about 7% as high-valuation tech stocks pulled back across the market. The AI and data analytics company had hit record highs earlier in the month,

Last week, Citron's Andrew Left announced a short position against Palantir, suggesting that the stock was "beyond overvalued" at nearly $190 per share. Citron later argued that Palantir stock should be trading at $40. Palantir shares continued to plummet on Wednesday and were down more than 20% over the past five days.

This AI infrastructure play has delivered bigger gains than its larger peers since going public earlier this year.

Palantir Technologies was the worst performer in the S&P 500 on Tuesday, with the stock continuing to surrender gains following a blowout earnings report earlier this month.

Short-seller Citron targets PLTR again, using a Databricks comparison to argue the stock is overvalued after its report sent shares falling.