AI Stocks at Risk: Potential Drops of 71%-80% for Investors

Published Date : 26/06/2025 

While the rise of artificial intelligence (AI) has been a major trend on Wall Street, not all AI stocks are worth the hype. Select analysts predict that three popular AI stocks could see a significant drop in value over the next year. 

The evolution of artificial intelligence (AI) has been the hottest trend on Wall Street for more than two years. Though most Wall Street analysts are excited about the long-term potential for AI, not all AI stocks are necessarily worth buying in their eyes. Three widely-held and closely-followed AI stocks are on shakier ground than investors realize, according to select analysts.

Nothing has garnered more attention on Wall Street since late 2022 than the rise of artificial intelligence (AI). Empowering software and systems with the tools to make split-second decisions without the need for human oversight is a game-changer that can benefit most industries around the globe. While most Wall Street analysts share the belief that AI can positively transform corporate America, there are mixed views as to which AI stocks are destined to head higher.

Based on the price targets of select Wall Street analysts, three skyrocketing artificial intelligence stocks are expected to plummet between 71% and 80% over the next year. Since 2023 began, shares of AI- and machine learning-powered data-mining specialist Palantir Technologies (NASDAQ: PLTR) have catapulted higher by more than 2,000%. This outperformance stems from Palantir's Gotham and Foundry platforms having no clear one-for-one replacements, which intimates that its software-as-a-service solutions enjoy a sustained moat.

Despite this irreplaceability, longtime Palantir bear Rishi Jaluria of RBC Capital Markets believes shares of the company will fall to $40. Based on a closing price of $137.30 per share on June 20, Jaluria's price target implies 71% downside over the next year. The prominent issue with Palantir is the company's valuation. Even though Wall Street typically assigns a premium multiple to companies with clear-cut competitive advantages like Palantir, it closed out June 20 with a trailing-12-month price-to-sales (P/S) ratio of 110! Historically, companies on the leading edge of a next-big-thing innovation have seen their bubbles burst at P/S ratios ranging from roughly 30 to 40. Palantir is approximately three times higher than the normal level where bubbles burst.

Palantir stock is also at risk if an AI bubble were to form and burst. Every game-changing technology since (and including) the advent of the internet has navigated its way through a bubble-bursting event. Though the multiyear contracts Palantir has landed with the U.S. government via Gotham, and its subscription-driven Foundry platform for corporate clients, can help the company avoid an immediate sales drop-off, investor sentiment would undoubtedly weigh on AI leaders like Palantir if the AI bubble bursts. 

Frequently Asked Questions (FAQS): 

Q: What is the current trend in AI stocks?

A: The rise of artificial intelligence (AI) has been a major trend on Wall Street, with many analysts excited about the long-term potential of AI. However, not all AI stocks are necessarily worth buying.

Q: Which AI stocks are at risk of plummeting?

A: Select analysts predict that three AI stocks, including Palantir Technologies, could see a significant drop in value over the next year, ranging from 71% to 80%.

Q: Why is Palantir Technologies at risk?

A: Palantir Technologies is at risk due to its high valuation, with a trailing-12-month price-to-sales (P/S) ratio of 110. Historically, companies with such high P/S ratios have seen their bubbles burst.

Q: What is the current price target for Palantir Technologies?

A: Rishi Jaluria of RBC Capital Markets believes that Palantir Technologies shares will fall to $40, implying a 71% downside from the closing price of $137.30 per share on June 20.

Q: How could an AI bubble affect Palantir Technologies?

A: If an AI bubble were to form and burst, investor sentiment would weigh heavily on AI leaders like Palantir Technologies, despite its multiyear contracts and subscription-driven platforms. 

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