The sudden reversal shows how the hottest AI trade and top-performing stock of the year is colliding with a broader market rotation out of Big Tech.

Palantir ( PLTR -5.81%) stock is getting hit with another substantial round of sell-offs Wednesday on the heels of a big valuation pullback in yesterday's trading. The artificial intelligence ( AI) leader's share price was down 7% as of 11:15 a.m. ET and had been down as much as 9.8% earlier in trading.

While the operational momentum is clearly solid, investors should pay closer attention to the risks. History shows Palantir stock can fall hard as sentiment shifts.