If you are on the hunt for overpriced blue-chip stocks to shed from your portfolio, you’ve come to the right place. Successful investors always keep an eagle eye on a stock’s valuation. Legendary investor Warren Buffett famously shies away from stocks that trade at more than 15 times future earnings. His recent purchase, Chubb (NYSE:CB), boasts a modest P/E ratio of 11. However, within the S&P 500 index, the average P/E ratio now hovers above 27, climbing alongside the relentless bull market we’ve witnessed over the last year and a half.

Comparing stocks to this average multiple reveals which ones are pricey relative to their peers. While some enjoy a lofty valuation thanks to robust earnings and stock price growth, others teeter dangerously on the brink of overvaluation, ripe for a substantial correction. Let’s uncover the blue-chip bubble trouble, pinpointing seven stocks preparing for a downward spiral.

Unveiling the Vulnerable: Market Favorite CrowdStrike Holdings (CRWD)

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Cybersecurity firm CrowdStrike Holdings (NASDAQ:CRWD) has been a star performer, with its stock skyrocketing by 120% in the past year, including a 40% surge just this year. Over the last five years, CRWD has seen a jaw-dropping 444% increase. However, such exponential growth has pushed the stock into pricey territory, currently trading at a whopping 950 times future earnings estimates.

Even though some investors argue that the premium price tag aligns with CrowdStrike’s rapid growth, caution is warranted. The company witnessed a 23% surge in CRWD stock in a single day post their impressive Q4 2023 results beat Wall Street’s expectations. However, this skating on thin ice can’t hide the fact that the stock is excessively expensive at the moment.

While CrowdStrike remains a highflyer in the cybersecurity domain, its current valuation raises eyebrows. Next on the docket is the company’s earnings report scheduled for June 4.

Palantir Technologies (PLTR): Riding the Valuation Wave

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Data analytics stalwart Palantir Technologies (NYSE:PLTR) finds itself in a similar boat, trading at 165 times future earnings estimates. PLTR, like CrowdStrike, basks in the glow of a 43% rise in the last year, with a 26% uptick in 2024. However, at such exorbitant multiples relative to earnings projections, Palantir investors are treading on thin ice.

Despite the company’s consistent profitability over six consecutive quarters, analysts are ringing alarm bells over its lofty valuation. A sky-high P/E ratio has led to a consensus “hold” rating among 12 Wall Street analysts covering Palantir stock. The company, known for its AI software for governments and corporations, appears swept up in the AI frenzy, putting even more pressure on its valuation.

Approaching Doomsday: Chipotle Mexican Grill (CMG)

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Chipotle Mexican Grill (NYSE:CMG), amidst its upcoming mammoth 50-for-1 stock split, isn’t spared from the high valuation bug. This quick-service restaurant darling is currently trading at a lofty 67 times future earnings forecasts, dwarfing rival McDonald’s (NYSE:MCD) at a modest 21 times. Moreover, with shares priced over $3,100, owning a piece of Chipotle cake isn’t cheap by any means.

Although the stock split aims to make Chipotle shares more accessible, investors shouldn’t expect the valuation to cool off anytime soon. The fast-growing Mexican cuisine specialist, with a 52% surge in the last year and a staggering 375% growth over five years, holds its ground as a star performer in the restaurant sector.

Despite the pre-split rally leading up to the June 26 event, a post-split selloff may lurk around the corner, advising investors to tread carefully.

Looming Danger: Advanced Micro Devices (AMD)

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In a bizarre turn of events, Advanced Micro Devices (NASDAQ:AMD) now boasts a loftier price tag compared to its archrival Nvidia (NASDAQ:NVDA). AMD shares are trading at a hefty P/E multiple of 247, while NVDA sits at 65 times forward earnings estimates. Nvidia recently announced a staggering 600% profit surge in Q1 from the previous year.

AMD’s high valuation stems from its robust earnings growth and the sky-high expectations surrounding its cutting-edge AI microchips. Positioned as Nvidia’s primary challenger in the burgeoning market,