Key Points
- Despite a strong market, some analysts are warning that AI stocks, Nvidia and Palantir, are overvalued.
- An analyst at Seaport Research predicts Nvidia’s stock could fall by 37% due to a high valuation and slowing AI spending.
- An RBC Capital analyst issued an even stronger warning for Palantir, suggesting a potential 71% drop.
- Concerns about Palantir are heightened by the significant stock sales made by its top executives.
The stock market may be hitting record highs, but don’t pop the champagne just yet. Some Wall Street analysts are sounding the alarm on two of the hottest AI stocks, Nvidia and Palantir, warning they could be headed for a major fall. They argue that despite a recent market rally, the share prices for these AI darlings have risen too far, too fast.
One analyst from Seaport Research Partners believes the hype around Nvidia has gone too far. He recently issued a “sell” rating on the stock, predicting it could drop by as much as 37%. His main concerns are Nvidia’s extremely high valuation, a potential slowdown in AI spending by big companies, and growing competition.
The warning for Palantir is even more severe. An analyst at RBC Capital believes the stock has a staggering 71% downside. He points to slowing growth in the company’s core government business and a valuation that appears to be completely disconnected from its actual performance. Adding to the concern is the fact that several top executives at Palantir, including the CEO, have been selling off large amounts of their shares.
To be clear, both companies are performing exceptionally well. Nvidia’s sales are booming thanks to its powerful new chips, and Palantir is rapidly signing up new customers for its unique AI platform.
The problem isn’t the businesses themselves, but their sky-high stock prices, which some experts believe have become dangerously overvalued. Investors are betting on a perfect future, and any small disappointment could send the stocks tumbling.
