By Wall Street’s most bullish AI darlings are facing a sudden credibility crisis.
Despite stellar earnings and record growth, analysts at major brokerages are sounding the alarm on two mega-cap tech giants: Palantir and Nvidia.
The culprit? Valuations have become so untethered from reality that several prominent research teams believe the stocks face potential declines of 45% to 60%.
As the AI boom shows signs of cooling and investors reassess fundamentals, these sell calls represent a critical moment for portfolio managers weighing whether momentum can carry these giants higher or whether mean reversion is imminent.
Palantir stock: The valuation reckoning
Monness, Crespi, and Hardt delivered the most pointed critique in a recent downgrade to sell.
According to analyst Brian White, “After a meteoric rise on the Gen-AI rocket, back to reality, valuation is egregiously rich.”
The firm’s downgrade isn’t about Palantir’s business fundamentals, which remain compelling.
Rather, it spotlights three structural concerns: lumpy government revenue, spotty execution, and what Monness calls a valuation “far out of line with fundamentals.”
The numbers back up this skepticism. Palantir trades at a price-to-sales ratio of 85, the highest in the S&P 500.
The stock carries a jaw-dropping P/E ratio of roughly 416, implying investors are paying over $4 for every dollar of current earnings.
Even with 62.8% year-over-year revenue growth and beating guidance, the market has priced in nearly perfect execution for years to come.
Jefferies Financial Group has similarly thrown in the towel, maintaining an “underperform” rating.
Other firms highlight that government revenue growth, Palantir’s crown jewel, decelerated to 52% quarter-over-quarter, a warning sign that growth may not be perpetual.
Analyst consensus shows roughly 60% implied downside from recent levels.
When a data analytics company trading above all peers suddenly becomes a contrarian short, skepticism toward AI’s staying power clearly permeates the Street.
What analysts say about Nvidia stock: The perfection trap
Seaport Global Securities’ lone sell rating on Nvidia carries even more weight given the rarity of dissent among the chipmaker’s 48 analyst followers.
Jay Goldberg frames the thesis plainly: “There’s a lot more that can go wrong with Nvidia than can go right,” and “AI is largely priced in.”
This isn’t a cyclical downturn call; it’s a structural argument that AI’s biggest wins are already baked into the stock.
Seaport’s $100 price target implies roughly 45–50% downside from recent trade levels.
The firm points to sold-out Blackwell inventory for 2025, limited near-term upside, and the risk that major customers are designing their own chips, eroding Nvidia’s competitive moat.
Goldberg warns that “it’s likely that AI budgets slow in ’26,” removing the tailwind that’s driven the rally.
While Goldberg stands as a contrarian among roughly 80 analysts, his scrutiny reflects a broader market concern: Nvidia trades at a 59 P/E ratio, reflecting an AI narrative already reflected in the stock.
If spending cycles disappoint or China exposure tightens, the downside could be material.
The post Why analysts are flagging these two big AI winners as ‘Sell’: here’s what to know appeared first on Invezz
