Rackspace Technology (RXT) shares have stunned the market with a historic 265% vertical climb over the last five trading days, fueled by a high-stakes strategic partnership with Palantir (PLTR).
The deal, which integrates PLTR’s artificial intelligence (AI) platform into its private cloud, has sparked a “Hail Mary” rally for a stock that was hovering at a year-to-date low of $0.41 just weeks ago.
Despite this explosive move to the upside, Rackspace stock remains down some 50% from its 52-week high, leaving investors wondering if this is a genuine AI-driven pivot or a terminal bounce.
Here’s Why Rackspace Stock Remains Super Risky to Own in 2026
The sheer velocity of Rackspace’s recent rally suggests it’s driven more by “meme” dynamics than fundamental re-evaluation.
Even after the meteoric run, RXT remains a penny stock, which makes it vulnerable to extreme volatility and speculative retail frenzies.
In the weeks leading up to the Palantir announcement, short interest in RXT stock had risen to over 27%, signaling much of its explosive surge last week was likely a massive short squeeze.
Historically, rallies built on short-covering and hype rather than sustainable earnings growth tend to fade just as quickly as they ignite, leaving late-comers vulnerable to a sharp correction.
Financials Warrant Cutting Exposure to RXT Shares at Current Levels
While the Palantir headline is positive for Rackspace shares, the firm’s balance sheet tells a more sobering story.
The AI partnerships doesn’t immediately fix revenue deceleration or persistent net losses, which have long weighed on the company’s share price.
Meanwhile, RXT is groaning under a massive debt burden of more than $2.8 billion, with interest expenses continuing to eat away at its narrow margins.
Investors should also note that Rackspace Technology has a small cadre of PLTR-trained engineers, and scaling this workforce will require significant capital it just can’t afford.
This is partly why options traders are currently pricing in a decline in RXT to $0.35 by mid-May.
Wall Street Continues to Rate Rackspace Technology at ‘Hold’
What’s also worth mentioning is that Wall Street remains cautious on Rackspace Technology as well.
The consensus rating on RXT shares sits at “Hold” only with the mean target of $1.48 indicating potential downside of about 10% from current levels.
This article was created with the support of automated content tools from our partners at Sigma.AI. Together, our financial data and AI solutions help us to deliver more informed market headline analysis to readers faster than ever.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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