2 Popular AI Stocks to Sell Before They Drop 50% and 69%, According to Wall Street Analysts
Palantir Technologies (NASDAQ: PLTR) and Super Micro Computer (NASDAQ: SMCI) are two of the most popular artificial intelligence (AI) stocks on the market. Since January 2023, Palantir has returned 1,900%, and Supermicro has returned 480%. But certain Wall Street analysts think the stocks are wildly overvalued.
Rishi Jaluria at RBC Capital recently set a target price of $40 per share for Palantir. That implies 69% downside from its current share price of $130.
Mike Ng at Goldman Sachs recently set a target price of $24 per share for Supermicro. That implies 50% downside from its current share price of $48.
Here's what investors should know about Palantir and Supermicro.
Palantir Technologies: 69% implied downside
Palantir develops data analytics and artificial intelligence (AI) software for customers in the commercial and government sectors. International Data Corporation has ranked the company as the market leader in decision-intelligence platforms, and Forrester Research has recognized its technology leadership in AI platforms, a market forecast to grow at 40% annually through 2028.
Palantir reported solid first-quarter financial results. Revenue jumped 39% to $884 million, the seventh consecutive acceleration, driven by particularly strong sales growth in the U.S. commercial and government segments. Non-GAAP (non-generally accepted accounting principles) net income increased by 62% to $0.13 per diluted share. Management also raised its full-year guidance, with sales now expected to increase by 36% in 2025.
In short, Palantir has a strong presence in a quickly growing industry, and the company is evidently executing on that opportunity. The problem is valuation. Wall Street expects the company's adjusted earnings to increase by 31% annually through 2026. That makes the current valuation of 280 times adjusted earnings look absurdly rich.
Alternatively, Palantir currently trades at 105 times sales. No other company in the S&P 500 has a price-to-sales multiple above 35. That means Palantir's share price could drop 66% and it would still be the most expensive stock in the S&P 500. I doubt the stock will fall 69% (as Rishi Jaluria anticipates), but I think shareholders should maintain very small positions. The slightest bit of bad news could cause this stock to crash.
Super Micro Computer: 50% implied downside
Super Micro Computer develops data center servers and storage solutions, including rack-scale systems optimized for artificial intelligence and other high-performance computing applications. The company says its internal design capabilities and modular approach to product development enable it to bring new technologies to market very quickly, often months ahead of its competitors.
Supermicro accounted for 6.5% of global server sales during the fourth quarter of 2024, second only to Dell Technologies, which had a 7.2% revenue share. More importantly, Supermicro has emerged as the early leader in AI servers, a market forecast to grow by 37% annually through 2030, due to its rapid time-to-market capabilities.
Some analysts think Supermicro will lose market share as competition increases because there is nothing about its business model that cannot be replicated. Supermicro is not responsible for the innovation; it simply assembles chips built by other companies, such as Nvidia, into servers. Also, KeyBanc analysts argue that Supermicro has "structurally lower margins" because it owns fewer patents than its peers.
Supermicro reported disappointing financial results for the third quarter of fiscal 2025, which ended in March. Revenue increased by 19% to $5.6 billion, gross margin contracted by 2 percentage points, and non-GAAP net income fell 53% to $0.31 per diluted share. The company also cut its full-year guidance for the second time in as many quarters. Revenue is now expected to grow 49% in fiscal 2025, down from the initial forecast that called for 87% growth.
Wall Street expects Supermicro's adjusted earnings to grow by 18% annually through fiscal 2026, which ends in June 2026. That consensus makes the current valuation of 21 times adjusted earnings look reasonable, but analysts may be overestimating the company. Supermicro has missed the consensus earnings estimate by an average of 17% in the last four quarters.
Personally, I doubt the stock will drop 50% (as Mike Ng anticipates), though history suggests that sort of volatility is possible. But investors should limit stock purchases to companies with a durable competitive moat, and I'm not sure Supermicro satisfies that criterion.
Should you invest $1,000 in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!*
Now, it's worth noting Stock Advisor 's total average return is1,062% — a market-crushing outperformance compared to177%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of June 23, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
an hour ago
- CTV News
Debate is underway in U.S. Senate on Trump's big bill. It may go all night
WASHINGTON —Debate is underway in the Senate for an all-night session Sunday, with Republicans wrestling President Donald Trump's big bill of tax breaks and spending cuts over mounting Democratic opposition -- and even some brake-pumping over the budget slashing by the president himself. The outcome from the weekend of work in the Senate remains uncertain and highly volatile. GOP leaders are rushing to meet Trump's Fourth of July deadline to pass the package, but they barely secured enough support to muscle it past a procedural hurdle in a tense scene the day before. A handful of Republican holdouts revolted, and it took phone calls from Trump and a visit from Vice President JD Vance to keep it on track. GOP Sen. Thom Tillis of North Carolina announced Sunday he would not seek reelection after Trump badgered him for saying he could not vote for the bill with its steep Medicaid cuts. A new analysis from the nonpartisan Congressional Budget Office found that 11.8 million more Americans would become uninsured by 2034 if the bill became law. It also said the package would increase the deficit by nearly $3.3 trillion over the decade. But other Senate Republicans, along with conservatives in the House, are pushing for steeper cuts, particularly to health care, drawing their own unexpected warning from Trump. 'Don't go too crazy!' the president posted on social media. 'REMEMBER, you still have to get reelected.' All told, the Senate bill includes some $4 trillion in tax cuts, making permanent Trump's 2017 rates, which would expire at the end of the year if Congress fails to act, while adding the new ones he campaigned on, including no taxes on tips. The Senate package would roll back billions in green energy tax credits that Democrats warn will wipe out wind and solar investments nationwide, and impose $1.2 trillion in cuts, largely to Medicaid and food stamps, by imposing work requirements and making sign-up eligibility more stringent. Additionally, the bill would provide a $350 billion infusion for border and national security, including for deportations, some of it paid for with new fees charged to immigrants. If the Senate can push through overnight voting and pass the bill, it would need to return to the House. Speaker Mike Johnson has told lawmakers to be on call for a return to Washington this coming week. Democrats ready to fight all night Unable to stop the march toward passage of the 940-page bill, the Democrats as the minority party in Congress is using the tools at its disposal to delay and drag out the process. Democrats forced a full reading of the text, which took some 16 hours, ending Sunday afternoon. Then senators took over the debate, filling the chamber with speeches, while Republicans largely stood aside. 'Reckless and irresponsible,' said Sen. Gary Peters of Michigan. 'A gift to the billionaire class,' said Sen. Bernie Sanders of Vermont. Sen. Patty Murray, the ranking Democrat on the Appropriations Committee, raised particular concern about the accounting method being used by the Republicans, which says the tax breaks from Trump's first term, in 2017, are now 'current policy' and the cost of extending them should not be counted toward deficits. 'In my 33 years here in the United States Senate, things have never -- never -- worked this way,' said Murray, the longest-serving Democrat on the Budget Committee. She said that kind of 'magic math' won't fly with Americans trying to balance their own household books. 'Go back home and try that game with your constituents,' she said. 'We still need to kick people off their health care -- that's too expensive. We still need to close those hospitals -- we have to cut costs. And we still have to kick people off SNAP -- because the debt is out of control.' Sanders said Tillis' decision not to seek reelection shows the hold that Trump's cult of personality has over the GOP. 'We are literally taking food out of the mouths of hungry kids,' Sanders said, while giving tax breaks to Jeff Bezos and other wealthy billionaires. GOP leaders unphased Republicans are using their majorities to push aside Democratic opposition, and appeared undeterred, even as they have run into a series of political and policy setbacks. 'We're going to pass the 'Big, beautiful bill,' said Sen. Lindsey Graham, R-S.C., the Budget Committee chairman. 'And President Trump is going to sign it.' The holdout Republicans remain reluctant to give their votes, and their leaders have almost no room to spare, given their narrow majorities. Essentially, they can afford three dissenters in the Senate, with its 53-47 GOP edge, and about as many in the House, if all members are present and voting. Trump, who has at times allowed wiggle room on his deadline, kept the pressure on lawmakers to finish. He threatened to campaign against Tillis, who was worried that Medicaid cuts would leave many without health care in his state. Trump badgered Tillis again on Sunday morning, saying the senator 'has hurt the great people of North Carolina.' Later Sunday, Tillis issued a lengthy statement announcing he would not seek reelection in 2026. Democrats can't filibuster, but can stall Using a congressional process called budget reconciliation, the Republicans can muscle the bill through on a simple majority vote in the Senate, rather than the typical 60-vote threshold needed to overcome objections. Without the filibuster, Democrats have latched on to other tools to mount their objections. One is the full reading of the bill text, which has been done in past situations. Democrats also intend to use their full 10 hours of available debate time, now underway. And then Democrats are prepared to propose dozens of amendments to the package that would be considered in an all-night voting session -- or all-day, depending on the hour. GOP senators to watch As Saturday's vote tally teetered, attention turned to Sen. Lisa Murkowski, R-Alaska, who was surrounded by GOP leaders in intense conversation. She voted 'yes.' Several provisions in the package are designed for her state in Alaska. A short time later, Majority Leader John Thune, R-S.D., drew holdouts Sen. Rick Scott of Florida, Mike Lee of Utah and Cynthia Lummis of Wyoming to his office. Vance joined in. The talks dragged on. Then Vance led them all back in to vote. Later, Scott said he had met with the president, adding, 'We all want to get to yes.' Lee said the group 'had an internal discussion about the strategy to achieve more savings and more deficit reduction, and I feel good about the direction where this is going, and more to come.'
CTV News
2 hours ago
- CTV News
ADVERTISEMENT Watch July 1 tariff deadline approaching, Canadian officials say trade negotiations to continue. Former foreign affairs minister Peter MacKay anticipates that Prime Minister Mark Carney will continue negotiations over the upcoming Canada Day holiday.
July 1 tariff deadline approaching, Canadian officials say trade negotiations to continue. Former foreign affairs minister Peter MacKay anticipates that Prime Minister Mark Carney will continue negotiations over the upcoming Canada Day holiday.
Globe and Mail
2 hours ago
- Globe and Mail
Billionaire Bill Gates Has 66% of His Foundation's $45 Billion Portfolio Invested in 3 Outstanding Stocks
Bill Gates is one of the wealthiest people in the world, with a net worth exceeding $100 billion. What makes that even more impressive is that he's donated more than $60 billion of his wealth to the Gates Foundation, established in 2000. Much of those donations have come straight from Gates' personal portfolio, which includes a significant stake in Microsoft (NASDAQ: MSFT), the company he founded, as well as several important diversifying investments. Outside of Microsoft, Gates appears to be an investor focused on value, taking lessons from his longtime friend and former Gates Foundation donor and trustee, Warren Buffett. As a result, the Gates Foundation portfolio reflects the combination of Gates and Buffett's investment styles, including maintaining a highly concentrated portfolio of top investments. As such, nearly two-thirds of the foundation's trust fund is held in just three outstanding stocks. 1. Microsoft (31.1%) Gates first donated Microsoft stock to the foundation upon its founding in 2000, and he's steadily added more shares over time. And while the foundation has often sold some of its shares to fund grants, it's managed to build a substantial stake in the tech company. As of the end of the first quarter, the trust held about 28.5 million shares. Those shares are worth more than $14 billion as of late June. Microsoft stock has soared to an all-time high in recent weeks on the back of its strength in artificial intelligence (AI). After a $10 billion investment in OpenAI in early 2023, Microsoft's Azure became the leading cloud computing platform for developers looking to take advantage of leading-edge AI models. It's exhibited market-leading growth since then, including 33% growth in its most recent quarter. What's more, Microsoft management says the business remains supply constrained as demand remains high, so it's likely to maintain that growth rate for some time. Microsoft has also benefited from integrating AI into its enterprise software business. Microsoft 365 commercial revenue has grown at a double-digit pace, bolstered by selling more seats at higher average prices. Microsoft has developed specialized AI assistants, or Copilots, for applications, including GitHub and Dynamics 365, which help businesses get more out of the software. It also offers a Copilot Studio, which allows businesses to use their own data to create specialized AI assistants. As a result, Microsoft has seen strong revenue growth and even better profit growth as its margins expand. And with Azure leading the company going forward, that should only continue, going forward. Investors will have to pay a premium price for the stock right now, with its forward P/E of about 37. But with a massive cash cow of its enterprise software business supporting the rapid expansion and growth of its cloud computing business, it looks like it's worth the premium price. 2. Berkshire Hathaway (18.4%) As mentioned, Warren Buffett has been a longtime donor to the Gates Foundation. In fact, his total investments since 2006 come to more than $43 billion. And when Buffett donates to non-profits, he donates Class B shares of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). Buffett maintains control of the company by converting super-voting Class A shares to Class B shares before donating. Buffett requires the Gates Foundation to pay grants equal to the amount he donates every year plus an additional 5% of the trust's assets. Nonetheless, Gates has managed to hold onto a significant number of Berkshire Hathaway shares. As of the end of the first quarter, the trust held 17.1 million shares. Those are worth about $8.3 billion. Berkshire is a holding company that includes several owned and operated businesses. As a group, those businesses have been executing at a high level. That said, the biggest segment, insurance, struggled due to natural disasters like the California wildfires. Overall, that led to some disappointing first-quarter results. The bulk of Berkshire's value stems from its publicly traded equity portfolio and cash. The total value of its liquid investments sits around $631.8 billion. Over half of that is in Treasury bills or cash as Buffett looks for something he can buy at a good value. That's an increasingly difficult task as Berkshire's size leaves only a handful of companies as viable options for Berkshire to take a stake in. Shares of Berkshire have fallen since Buffett announced his retirement from the CEO position effective Jan. 1, 2026. It now trades at a price-to-book ratio of 1.6. That price is still historically expensive for Berkshire, though, and Buffett has neglected to buy back shares at that valuation over the last several quarters. That said, Berkshire may deserve to trade for a higher multiple, given that it's currently unleveraged (not utilizing the insurance float for investments) and sitting on a ton of cash. 3. Waste Management (16.2%) Most of the other stocks held by the Gates Foundation trust reflect the value-investing ideas that made Warren Buffett so successful. Waste Management (NYSE: WM) may be the most emblematic of that. Waste Management has been a staple of the portfolio since 2002. The long-term buy-and-hold position has steadily increased in value over the years with limited share sales. The trust held 32.2 million shares at the end of the first quarter. Those are worth about $7.3 billion as of this writing. What makes Waste Management appealing is its tremendous competitive moat. It holds an unmatched portfolio of landfills, which is impossible to match due to the high bar required to receive a permit for new landfills. As such, many smaller waste haulers pay Waste Management to use its landfills. Waste Management also benefits from scale, which allows it to create denser pickup routes and get more out of its operations. As a result, the company sports strong profit margins. With its excess cash, the company has been able to grow through acquisition. The most recent of which is Stericycle, which is now called WM Healthcare Solutions. At its most recent investor day, management predicted $50 million in cross-selling opportunities with Stericycle in addition to its $250 million in cost synergies. Management also sees revenue growth accelerating to about 9% per year with expanding earnings before interest, taxes, depreciation, and amortization (EBITDA) margins through 2027. That will support strong free cash flow growth, which management can use for additional tuck-in acquisitions, its growing dividend, or share repurchases. With an enterprise value of about 15 times the expected EBITDA over the next 12 months, the shares look fairly priced and could be a good opportunity for a dividend growth investor looking for companies with strong free cash flow growth potential. Should you invest $1,000 in Microsoft right now? Before you buy stock in Microsoft, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $966,931!* Now, it's worth noting Stock Advisor 's total average return is1,062% — a market-crushing outperformance compared to177%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 23, 2025 Adam Levy has positions in Microsoft. The Motley Fool has positions in and recommends Berkshire Hathaway and Microsoft. The Motley Fool recommends Waste Management and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
