2 of Wall Street's Highest-Flying Artificial Intelligence (AI) Stocks Can Plunge Up to 94%, According to Select Analysts

Despite projections of a $15.7 trillion boost from AI by 2030, Wall Street analysts express significant skepticism toward prominent AI-related stocks Palantir (PLTR) and Tesla (TSLA). RBC Capital Markets' Rishi Jaluria projects a 72% downside for Palantir, citing its unsustainable valuation with a price-to-sales ratio of approximately 117. Concurrently, GLJ Research's Gordon Johnson forecasts a 94% collapse for Tesla, highlighting its hardware-centric model, frequent price cuts, overhyped projects, and earnings quality reliant on regulatory credits rather than core operations, despite its over 200x trailing EPS valuation.

Analysis

Despite a forecast $15.7 trillion economic boost from AI by 2030, specific analyst commentary presents a strongly bearish case for Palantir (PLTR) and Tesla (TSLA). For Palantir, despite a 2,370% share price increase and a recognized competitive moat in its Gotham and Foundry platforms, RBC Capital highlights a critical valuation risk. The company trades at a price-to-sales (P/S) multiple of approximately 117, a level historically unsustainable for megacap tech leaders, which typically peak at P/S ratios of 30-40. This valuation concern persists even as Palantir's commercial customer count grew 48% year-over-year, challenging analyst doubts about its scalability. For Tesla, GLJ Research projects a 94% downside, focusing on fundamental weaknesses. The report contrasts Tesla's lower-margin hardware business, which has necessitated multiple price cuts, with the high-margin software models of its 'Magnificent Seven' peers. A key concern is Tesla's earnings quality, with over half of its recent pre-tax income attributed to non-core sources like automotive regulatory credits—which face legislative termination risk—and interest income, rather than vehicle sales. This financial structure, coupled with a history of overpromising on innovations like full self-driving, makes its valuation of over 200 times trailing EPS appear exceptionally stretched, particularly as EPS has been declining.

Key Decisions for Investors

• Investors in Palantir should scrutinize its price-to-sales multiple of approximately 117, as it sits far above historical peaks for growth companies and may signal significant valuation risk despite its strong competitive moat and 48% growth in commercial clients.
• For Tesla, it is crucial to analyze the sustainability of its earnings, given the heavy reliance on regulatory credits and the potential impact of their legislative removal, as its valuation north of 200 times trailing EPS is highly sensitive to changes in profitability.
• Given that every major technology trend has historically experienced a bubble-bursting event, holders of high-valuation AI-related stocks should evaluate their exposure and distinguish between secular growth stories and sentiment-driven momentum.
• Consider the risk associated with Tesla's hardware-centric business model, which faces increasing competition and pricing pressure, a stark contrast to the high-margin, scalable software models of other large-cap tech firms.