Palantir Technologies ($PLTR$) was a high flyer lately, but that tide turned sharply negative. After a massive multi-week rally that pushed shares past the $160 mark, the popular artificial intelligence software stock dropped over 10% in just two trading sessions. Palantir is still an impressive growth company, but an ideal combination of regulatory concerns, stratospheric valuation and seals of disapproval from prominent investors has made a dent in the market’s appetite for it.

The Trump AI Executive Order Ignites Policy Fears

There were several reasons for the sale, and one was Washington. President Trump issued a new executive order for more oversight over advanced artificial intelligence systems. AI software makers must submit their cutting-edge models for the government to test for safety at least a month before their release.

These benchmarking tests are currently voluntary, but investors fear that they may hold investors responsible at a later date. This uncertainty is particularly troubling for Palantir, which has a strong dependence on lucrative federal contracts and extensive partnerships with government agencies.

Michael Burry Bets Against the AI Narrative

Adding fuel to the fire, famous “Big Short” investor Michael Burry renewed his bearish stance on the company. Burry said the stock is at a precarious new juncture. He has indicated a technical head and shoulders pattern in the chart, that typically foretells a significant drop in price. Calling the stock a sand castle built on AI hype, Burry estimates that Palantir trades at 16 times its actual intrinsic value.

Strong Core Earnings vs. Stretched Valuations

Ironically, Palantir’s actual business operations are performing very well. The firm did better than expected, reporting first quarter revenue of $1.63 billion, fueled by huge gains in U.S. commercial and defense business.

But the attention in the market now has moved from growth rates to valuations and valuations only at higher levels. Buy-rated investors are reconsidering the stock in the face of growing rivals in the enterprise AI market and local legal battles concerning engineer arbitration and data privacy in the UK. For now, PLTR is struggling to maintain key technical support levels.