The evolution of AI is the most meaningful advancement for corporate America in decades.
An AI applications company that’s soared more than 2,300% over the last four years may plummet by up to 59%, according to one analyst.
Meanwhile, an AI-driven company that revolutionized an industry has left many of its lofty innovative promises unfulfilled.
Over the last four years, the evolution of artificial intelligence (AI) has been Wall Street's hottest trend. Empowering software and systems with the ability to make split-second, autonomous decisions is a technological leap forward that analysts believe is worth trillions of dollars.
While most analysts view the AI infrastructure build-out as the most meaningful advancement for corporate America in decades, optimism for individual AI stocks isn't universal. According to bottom-of-the-barrel price targets from select Wall Street analysts, two standout AI stocks, Palantir Technologies (NASDAQ:PLTR) and Tesla (NASDAQ:TSLA), can plunge up to 93%.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Image source: Getty Images.
There may not be an applications company that's benefited more from the evolution of AI than software-as-a-service provider Palantir, whose shares have skyrocketed more than 2,300% since the AI-driven bull market began in October 2022.
Palantir's claim to fame is its AI- and machine learning-powered Gotham platform, which assists the U.S. government and its allies with military mission planning and oversight. This platform typically lands highly profitable multi-year deals and delivers sustainable double-digit sales growth.
Despite Palantir's outperformance, Jefferies (NYSE:JEF) analyst Brent Thill isn't a fan. Thill expects Palantir's shares to plummet to $80 per share, representing up to 59% downside.
Thill is skeptical that Palantir will be able to sustain its outsize growth much longer. More challenging year-over-year comparisons, coupled with moderating international growth, could make it difficult for Palantir to justify its premium valuation.
Speaking of valuation, no company at the forefront of a game-changing technology has sustained a price-to-sales (P/S) ratio above 30 for a lengthy period. Palantir entered 2026 with a P/S ratio above 100, and it's currently sporting a P/S ratio of approximately 82.
Image source: Getty Images.
Electric-vehicle (EV) maker Tesla is another company in which AI is foundational to its success. AI plays an integral role in its full self-driving (FSD) software and is paramount to the success of Optimus, the company's humanoid robots.
Tesla revolutionized the auto industry by becoming the first EV-focused company to generate recurring profits. Elon Musk's company is also in the midst of diversifying its revenue stream through energy generation and storage products, and Optimus.
But none of these ventures have impressed GLJ Research founder and analyst Gordon Johnson. According to Johnson, Tesla is expected to plummet to $24.86 per share, or roughly 93% below where it ended the previous week. This oddly specific projection is arrived at by setting a 15X forward earnings multiple on Tesla and working backward with a 9% discount rate.
Johnson's skepticism concerns Tesla's innovations and its valuation.
Regarding the former, Johnson has been a longtime critic of FSD, citing safety data and disengagement rates as evidence that the technology isn't ready for autonomous application. It should be noted that, despite more than a decade of Musk claiming that Level 5 FSD was "one year away," Tesla hasn't advanced beyond Level 2 FSD.
Tesla's valuation is also eye-popping in all the wrong ways. Musk's company is expected to deliver low-double-digit annual sales growth in 2026 and 2027, yet trades at a forward price-to-earnings multiple of 172!
If just a handful of Elon Musk's unfulfilled promises are backed out of Tesla's valuation, the company's stock would likely crater.
Most investors think they missed the AI boat because they didn't buy Nvidia in 2005.
But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout, a massive technology build-out that Google’s CEO says could be more profound than fire or electricity.
While everyone watches the chip designers, one "backbone" company provides the critical technology that Nvidia and AMD literally cannot function without. We’ve detailed this under-the-radar player in our new AI Playbook.
Continue »
Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.