Shares of Palantir Technologies (NASDAQ: PLTR) advanced 1,110% during the last two years as the company benefited from strong demand for its artificial intelligence platform. But most Wall Street analysts see the stock as wildly overvalued. The median target of $39 per share implies 52% downside from its current share price of $80.
Brad Zelnick at Deutsche Bank is particularly bearish on Palantir. He maintained his sell rating in a recent note, but raised his 12-month target price to $26 per share. That implies 68% downside from the current share price.
Shares of Super Micro Computer (NASDAQ: SMCI) soared 305% in the last two years as the company benefited from its leadership in artificial intelligence servers. But most Wall Street analysts think the stock is too expensive. The median target of $28 per share implies 15% downside from the current share price of $33.
Mehdi Hosseini at Susquehanna is particularly pessimistic. He maintained his sell rating in a recent note, and lowered his 12-month target price to $15 per share. That implies 55% downside from the current share price.
Here's what investors should know about Palantir and Super Micro.
Palantir Technologies: The stock Deutsche Bank says could fall 68%
Palantir develops data analytics software that lets commercial enterprise and government agencies transform complex information into actionable insights. Last year, Palantir added an artificial intelligence (AI) platform called AIP to its portfolio. AIP brings support for large language models to its core data platforms Gotham and Foundry, which lets clients apply generative AI to their operations.
Here is an example: A hospital might use Foundry to schedule nurses in accordance with personal availability and projected patient loads determined by past demand trends. AIP would let hospital administrators engage the platform with natural language. For instance, they could prompt the scheduling system to automatically identify uncovered shifts and recommend solutions.
AIP has garnered praise from various industry experts. Forrester Research recently named Palantir a leader in artificial intelligence and machine learning platforms. The analysts wrote, "Palantir is quietly becoming one of the largest players in this market." It was also one of two top-ranked vendors in the 2024 Dresner Advisory Services market study on artificial intelligence, data science, and machine learning software.
However, Wall Street is exceedingly bearish on Palantir because of its valuation. In fact, only six companies in the S&P 500 have a higher percentage of sell ratings than Palantir, according to FactSet Research. Wall Street estimates earnings will increase 31% during the next four quarters. That makes the current price-to-earnings (PE) ratio of 225 look very expensive.
The most prudent decision investors can make is to avoid Palantir stock until it trades at a more reasonable price. Additionally, current shareholders should consider trimming or exiting large positions, particularly if they are alarmed by the possibility of a 68% decline.
Super Micro Computer: The stock Susquehanna says could fall 55%
Super Micro Computer builds servers, storage, and networking hardware for enterprise and cloud data centers. Internal manufacturing capabilities and modular product development distinguish the company from rivals, such that Super Micro has often been first to market with hardware featuring the latest chips from suppliers like Nvidia.
Additionally, the electronic "building blocks" it uses to make servers can be assembled in an almost countless number of combinations, giving customers flexibility in designing data center systems. Those advantages have helped Super Micro secure a leadership position in the AI server market, which is forecast to grow at 30% annually through 2033. That explains the 305% upside in the stock during the last two years.
However, the stock is also down 72% from its record high because Super Micro has been hammered by bad news. Hindenburg Research accused the company of accounting manipulation in August. The Wall Street Journal reported the company was being probed by the Justice Department in September. And Ernst & Young resigned as its auditor in October, saying it was "unwilling to be associated with financial statements prepared by management."
On the bright side, Super Micro found a new auditor in November, and management said an internal review found no evidence of misconduct in December. But the company has not yet filed its annual report for fiscal 2024 (which ended in June 2024), nor has it filed its first quarterly report for 2025. It was granted an extension on the paperwork, but the stock will likely be delisted from the Nasdaq Exchange if anything is amiss by the deadline of Feb. 25.
Once these issues are resolved, expect Super Micro shares to either move much higher or much lower. But because no one knows which direction the chips will fall, the most prudent course of action is to avoid the stock right now. It is possible that Mehdi Hosseini at Susquehanna is correct in thinking the stock will plunge 55%. Shareholders unsettled by that possibility should think about trimming or exiting their position.
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Trevor Jennewine has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends FactSet Research Systems, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
