Palantir Technologies: Potential 65% Downside

Among the top echelon of AI stocks facing a potential nosedive is Palantir Technologies, as one Wall Street analyst predicts. Rishi Jaluria from RBC Capital has suggested a grim valuation of $9 per share, signaling a grave 65% drop if proven correct.

While Jaluria acknowledges Palantir’s commendable operating results, he expresses concerns over the sustainability of revenue drawn from deals with special purpose acquisition companies (SPACs). This revenue source being unsustainable paints a worrisome picture going forward.

Despite valid concerns raised by Jaluria, Palantir has distinct competitive advantages. Its flagship Gotham operating segment, catering to government data analysis and mission planning, is a reliable revenue driver. The future, however, rests on the commercial success of its Foundry platform, essential for streamlining business operations.

Despite a record of robust sales growth and unique scalability, Palantir’s high forward P/E ratio of 65 and lofty price-to-sales ratio present challenges, especially in an already inflated market.

Nvidia: Potentially 22% Downside

Another heavyweight in the AI realm that might hit turbulence is Nvidia, the semiconductor giant that has greatly profited from the AI boom. Despite most analysts being extremely bullish on Nvidia, Ross Seymour from Deutsche Bank stands out with a $100 price target post the company’s 10-for-1 stock split, reflecting a potential 22% decline.

Nvidia’s growth trajectory has been impeccable, with its H100 GPU dominating AI-accelerated data centers. Its GPUs claimed a whopping 98% share of the 3.85 million AI-GPUs shipped last year, a remarkable feat in the industry.

Conclusion

As the AI revolution unfolds, the risks and rewards of investing in leading AI stocks remain palpable. While these stocks have tremendous potential, looming downside risks highlighted by select Wall Street analysts accentuate the need for caution and due diligence in navigating the volatile market terrain.