2 Popular AI Stocks to Sell Before They Drop 62% and 74%, According to Certain Wall Street Analysts

Artificial intelligence (AI) has emerged as a transformative force in the technology sector, with investors eagerly seeking opportunities to capitalize on its growth potential. However, not all AI stocks are created equal, and some may be overvalued or face significant headwinds. In this article, we will examine two popular AI stocks, Palantir Technologies (PLTR) and Super Micro Computer (SMCI), and explore the bearish outlooks provided by certain Wall Street analysts.



Palantir Technologies: A Highly Valued AI Play
Palantir develops data analytics software that enables customers to integrate information, train machine learning models, and apply AI to complex data. The company's platforms have been recognized as leaders in AI and machine learning by Forrester Research. However, analysts have mixed opinions on Palantir's competitive position, with Gartner scoring the company lower for its data integration tools and not mentioning it in its latest report on data analytics.

Palantir has reported impressive financial results, with customers increasing 43% and average existing customers spending 20% more in the fourth quarter. Revenue increased 36% to $828 million, and non-GAAP net income surged 75% to $0.14 per diluted share. Despite these strong results, Wall Street expects adjusted earnings to increase at a slower pace of 31% annually through 2026, making the current valuation of 255 times adjusted earnings look absurdly expensive.

Certain Wall Street analysts have set target prices that imply substantial downside for Palantir. Rishi Jaluria at RBC Capital and Brent Thill at Jefferies recommend selling Palantir, with Jaluria's lower target price of $40 per share implying 62% downside from the current share price of $106. Mehdi Hosseini at Susquehanna and Samik Chatterjee at JPMorgan Chase recommend selling Super Micro, with Hosseini's lower target price of $15 per share implying 74% downside from the current share price of $59.

Super Micro Computer: Lacking a Proprietary Advantage
Super Micro Computer manufactures servers and storage systems, priding itself on being first to market when suppliers like Nvidia release new chips. However, Susquehanna analyst Mehdi Hosseini argues that Super Micro lacks a proprietary advantage and is merely a contract manufacturer with willingness to commit working capital. He believes there is nothing unique about the company that will prevent larger competitors like Dell from eventually taking market share in AI servers.

Super Micro has been under scrutiny since August 2023, when short seller Hindenburg Research published details concerning accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures. A special committee appointed by the Board found no evidence of wrongdoing, but Super Micro is still out of compliance with the SEC. The company has not published its Form 10-K for fiscal 2024 or its Forms 10-Q for the first two quarters of fiscal 2025, raising concerns about its financial health and regulatory compliance.

Investors should be cautious about buying Super Micro stock until the regulatory issues have been resolved. Current shareholders should consider trimming large positions, as the stock could move sharply due to the lack of information and potential regulatory risks.

Conclusion
Palantir Technologies and Super Micro Computer are two popular AI stocks that face significant headwinds, according to certain Wall Street analysts. Palantir's high valuation and mixed analyst opinions raise concerns about its competitive position and growth prospects, while Super Micro's lack of a proprietary advantage and regulatory issues make it a risky investment. Investors should be cautious about chasing these stocks at their current valuations and consider trimming their positions, especially if they represent a large percentage of their portfolios.