Time to Dump These 2 AI Stocks? Wall Street Warns of 49% and 75% Nosedives Ahead

AI darling stocks aren’t bulletproof—some are primed for a brutal reckoning. Analysts spot two ticking time bombs in the sector. Here’s why the smart money’s heading for the exits.

### The Overhyped AI Plays Bleeding Cash

When Wall Street starts slashing targets, retail investors get left holding the bag. These two artificial intelligence stocks—once market darlings—now face catastrophic downside risks. No amount of buzzword bingo can save them.

### 49% Freefall Warning: The ‘Innovator’ Running on Fumes

One household name in AI solutions is burning through cash faster than a crypto startup at a Miami yacht party. Analysts see nearly half its value evaporating when quarterly results expose the growth-at-all-costs charade.

### 75% Collapse Coming for This ‘Disruptor’

The second stock’s premium valuation assumes robot-level execution. Too bad its management team keeps tripping over power cords. With institutional ownership cratering, the coming plunge could make 2022’s crypto winter look mild.

Remember: Wall Street’s ‘Strong Buy’ ratings last year are today’s fire-sale stickers. Nothing artificial about this intelligence—just old-fashioned profit-taking before the bubble pops.

Image source: Getty Images.

Palantir Technologies: 75% implied downside

Palantir develops data analytics and artificial intelligence (AI) platforms for the commercial and government sectors. Its software not only helps clients turn complex data into actionable insights, but also lets them train and deploy machine learning models that drive better decision-making over time. Use cases range from retail and manufacturing to defense and financial services.

The International Data Corporation has ranked Palantir as the market leader in decision intelligence software, andrecognized the company as a technology leader in artificial intelligence and machine learning platforms. That puts Palantir in a prime position. The data analytics software market is forecast to grow at 28% annually through 2030, according to Grand View Research.

Palantir reported exceptional second-quarter financial results that beat estimates on the top and bottom lines. Customers increased 43% to 849 and the average existing customer spent 28% more. In turn, revenue climbed 48% to $1 billion, the eighth straight acceleration, and non-GAAP earnings increased 77% to $0.16 per diluted share.

Palantir is clearly a fundamentally sound business, but no business is worth buying at any price. The stock currently trades at an absurdly rich 133 times sales. For context, the next most expensive member of theisat 30 times sales. That means Palantir's share price could drop 77% and it WOULD still be the most expensive stock in the index.

Investors should never put too much confidence in forecasts from individual analysts, but Wall Street analysts in aggregate see Palantir as overvalued. The average target price is $151 per share, implying 17% downside from the current share price of $182. Investors should steer clear of this stock until it's priced more reasonably.

Super Micro Computer: 49% implied downside

Super Micro Computer (commonly called Supermicro) designs and manufactures storage systems, compute subsystems, and servers, including full server racks tailor-made for artificial intelligence and other high-performance computing tasks. Importantly, the company established itself as an early leader in AI servers based on its ability to quickly bring new chips to market.

To elaborate, Supermicro uses electronic "building blocks" across product lines to quickly assemble a broad range of servers. That strategy lets the company rapidly release hardware featuring the latest technologies from suppliers like Nvidia and. In fact, CEO Charles Liang says Supermicro can often bring new AI chips to market two to six months before its competitors.

But that time-to-market advantage alone does constitute a durable competitive moat, and Supermicro has lost momentum as competition has intensified with. The company announced dismal financial results for the June quarter. Revenue increased 7% to $5.8 billion, gross margin narrowed 70 basis points to 9.5%, and GAAP earnings fell 33% to $0.31 per diluted share.

Last year, management said gross margins would normalize around 14% to 17% by the end of fiscal 2025, but margins have continued to contract in a clear sign Supermicro is losing pricing power as the AI server space becomes more competitive. To that end, the company slashed its revenue guidance to $33 billion (down from $40 billion) for the fiscal year ending in June 2026.

Looking ahead, Grand View Research says AI server sales will increase at 38% annually to reach $850 billion by 2030. But Supermicro's earnings are likely to grow less quickly given it lacks a durable competitive moat. Indeed, Wall Street expects the company's adjusted earnings to increase at 28% annually through the fiscal year ending in June 2027.

Admittedly, the current valuation of 23 times adjusted earnings still looks reasonable versus forward earnings estimates, but Wall Street has historically overestimated the company. Supermicro missed the consensus earnings estimate by an average of 13% over the last four quarters. So, while I doubt shares will plunge 49%, I still believe there are better places for investors to put their money.