Palantir Technologies stock just hit another record, but the lofty valuation of the defense-focused artificial-intelligence software company has analysts questioning whether it can go much higher. Palantir stock fell 1.

An impressive surge in the past few months has boosted Palantir stock to extremely expensive valuation levels. Palantir's potential to gain a bigger share of the AI software market could propel the stock higher despite the negative sentiment.

Palantir Technologies (NASDAQ: PLTR) has emerged as a leading artificial intelligence company, offering AI data analytics to the U.S. government and businesses. And the company is growing quickly, with sales rising 39% to $884 million and adjusted earnings increasing 63% to $0.13 per share in the first quarter.