2 Popular AI Stocks to Sell Before They Drop 30% and 55%, According to Select Wall Street Analysts

Despite strong performance in the AI sector, Palantir and Nvidia face sell ratings from some analysts citing valuation concerns and capacity constraints, respectively; Jefferies has a sell rating on Palantir with a target price implying 55% downside due to its high forward price-to-sales ratio, while Seaport Research has a lone sell rating on Nvidia with a 30% implied downside due to Blackwell GPU production being sold out for the year and export restrictions, though the consensus remains bullish on Nvidia with a median target price implying 22% upside.

Analysis

Palantir Technologies (PLTR) and Nvidia (NVDA) have demonstrated significant outperformance in the artificial intelligence sector, with share prices appreciating 2,000% and 875% respectively since January 2023. However, divergent analyst opinions have emerged. Jefferies' Brent Thill assigns a sell rating to Palantir, targeting $60 per share, implying a 55% downside from its current $136, primarily due to its forward price-to-sales (P/S) ratio exceeding 80, making it the market's most expensive software stock; the median analyst target of $110 also suggests a 19% downside. Despite this valuation concern, Palantir reported strong Q1 results with revenue up 39% to $884 million and non-GAAP net income increasing 62% to $0.13 per share, alongside raised full-year revenue growth guidance to 36% for 2025, driven by AI platform demand. Conversely, Nvidia faces a lone sell rating from Seaport Research's Jay Goldberg, with a $100 target implying 30% downside from its $143 price, citing the new Blackwell product line being sold out for the year—limiting estimate beats—and significant headwinds from U.S. export restrictions to China, which CEO Jensen Huang noted could cost billions in revenue. This contrasts with the median analyst target for Nvidia of $175, implying 22% upside. Nvidia's Q1 fiscal 2026 saw revenue rise 69% to $44 billion, though non-GAAP net income grew slower at 33% to $0.81 per share due to Blackwell production ramp-up costs and inventory write-downs linked to export controls. The article's author concurs with concerns over Palantir's valuation but views Nvidia's valuation of 45 times earnings as reasonable given its projected 40% annual earnings growth through fiscal 2027 and strong secular trends in data center GPUs and AI spending.

Key Decisions for Investors

• Investors holding Palantir Technologies (PLTR) should consider its exceptionally high forward P/S ratio (above 80) as a significant risk, potentially warranting a trimming of large positions or delaying new investments despite strong Q1 revenue growth of 39% and positive AI platform demand.
• For Nvidia (NVDA), despite a lone sell rating citing Blackwell GPU capacity constraints and export restrictions, the consensus remains bullish; investors might view its 45x P/E ratio as acceptable given 69% Q1 revenue growth and long-term AI tailwinds, suggesting holding or selectively adding to positions while monitoring geopolitical and supply chain risks.
• Given the substantial run-up in AI stocks, it is crucial to differentiate between companies, carefully evaluating individual valuations, such as Palantir's stretched metrics, against fundamental growth and specific headwinds like Nvidia's exposure to export controls.