2 Popular AI Stocks to Sell Before They Drop 57% and 60%, According to Wall Street Analysts

Palantir Technologies (NASDAQ:PLTR) and Super Micro Computer (NASDAQ:SMCI) are popular artificial intelligence stocks. Since January 2023, Palantir has added 3,000% and Super Micro has advanced 325%. But the Wall Street analysts below think the stocks are overvalued.

• Brent Thill at Jefferies recommends selling Palantir. His target price of $80 per share implies 60% downside from its current share price of $199.
• Mehdi Hosseini at Susquehanna recommends selling Super Micro. His target price of $15 per share implies 57% downside from the current share price of $35.

Here's what investors should know about these popular AI stocks.

Image source: Getty Images.

Palantir Technologies: 60% downside implied by Jefferies' target price

Palantir develops data analytics and artificial intelligence (AI) platforms to help customers in the public and private sectors integrate data, identify actionable insights, and automate work. Forrester Research recently ranked Palantir as a leader in AI platforms, and Sanjit Singh at Morgan Stanley sees Palantir emerging as the standard in enterprise AI.

The bull case centers around unique software. Whereas traditional analytics tools feature dashboards that tell clients what is happening, Palantir goes further. Its software revolves around a decision-making framework that helps customers decide what should happen next, and it lets them execute actions within the platform.

Palantir is also popular for providing flexibility and supporting privacy. Its AI platform gives customers the freedom to deploy the large language models of their choosing and swap between models without rewriting underlying applications. Palantir's software also includes governance controls that ensure business data is never fed back to model developers.

The bear case for Palantir is entirely focused on its valuation. Despite impressive financial results -- revenue increase 93% in the second quarter, the 12th consecutive acceleration -- Palantir currently trades at 78 times sales, making it the most expensive stock in the S&P 500 by a wide margin. The next closest contender is CrowdStrike at 50 times sales.

Indeed, Brent Thill says Palantir has excellent fundamentals, but the valuation simply does not make sense. He also thinks the company may be underinvesting in future growth, citing its high margins as evidence. But Thill is in the minority on Wall Street, as most analysts think the stock is undervalued. Palantir has a median target price of $223 per share, implying 12% upside from its current share price of $199.

Personally, I think Palantir is an excellent company with strong growth prospects, but whether it can grow fast enough to justify the current valuation is debatable. That makes the stock risky, so investors should keep their positions small. It is possible that Palantir could lose 60% of its value in the next year.

Super Micro Computer: 55% downside implied by Susquehanna's target price

Super Micro Computer assembles high-performance servers and other equipment used in data centers. Its products help businesses run demanding workloads, such as cloud services and AI applications. The company works closely with semiconductor companies like AMD and Nvidia to build servers featuring the latest CPUs and GPUs.

The bull case for Super Micro centers on immense demand for AI infrastructure. The five largest hyperscalers are forecast to spend $800 billion on capital expenditures in 2026, the vast majority of which will support AI compute capacity, according to Goldman Sachs. And analysts think that figure could hit $1.1 trillion in 2027.

The bear case for Super Micro centers on profitability. There is nothing particularly unique about the company, meaning it may lack a durable competitive advantage that protects its pricing power. Indeed, gross margin declined from 13.8% in fiscal 2024 to 11.1% in fiscal 2025 to 10.8% in fiscal 2025 despite tremendous demand for AI infrastructure.

Also, Super Micro has been at the center of two major controversies in recent years. In 2024, short-seller Hindenburg Research accused the company of financial manipulation and highlighted problems with corporate governance and export controls. In 2026, the latter allegations gained credibility when federal prosecutors charged three individuals associated with Super Micro with conspiring to divert $2.5 billion in AI servers to China.

Importantly, while the accounting irregularities Hindenburg highlighted have never been substantiated, weakness in corporate governance and internal export controls pose major risks to investors even without proof of deliberate financial fraud. Susquehanna analyst Mehdi Hosseini says the situation "underscores the urgency" of replacing CEO Charles Liang.

Super Micro currently trades at 11 times earnings, a seemingly reasonable valuation for a company whose earnings are forecast to increase at 23% annually over the next three years. Nevertheless, I think investors should avoid Super Micro. Not only does the company lack a durable competitive advantage, but past problems with weak corporate governance leave room for unpleasant surprises in the future.

Trevor Jennewine has positions in CrowdStrike, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Advanced Micro Devices, CrowdStrike, Goldman Sachs Group, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.