Here’s a refreshed look at three AI darlings on Wall Street that analysts say could see dramatic drops of 71% to 80%. Read on for a quick intro, key takeaways, deep dives into each name, a handy FAQ, and a simple next step.
Short Intro
The artificial intelligence boom has sent many tech stocks to record highs this year. But amid the excitement, some Wall Street analysts see major pullbacks ahead. They warn that stretched valuations, tougher competition, and shifting market sentiment could trigger steep sell-offs. Below, we break down three once-soaring AI plays that carry heavy downside risk—so you can decide whether to hold, trim, or sit on the sidelines.
3 Key Takeaways
1. AI hype has driven gas-price valuations that may prove unsustainable.
2. Slowing revenue growth and rising costs could invite sharp corrections.
3. Watching analyst price targets can help you spot potential red flags.
1. Palantir Technologies (Ticker: PLTR)
Potential Drop: ~75% (Current price: $28; Analyst target: $7)
Why It Soared
Palantir’s data-mining software and recent push into AI tools won praise from investors. A string of big government and corporate wins fueled a 200% gain so far this year.
What Analysts Warn
• J.P. Morgan says Palantir’s pipeline may have peaked. Contract renewals could slow as public budgets tighten.
• The company still posts losses and burns cash on new AI research. High R&D spending leaves little margin for error.
• A price target of $7 implies a 75% slide if sentiment shifts.
Bottom Line
Palantir may remain a leader in data analytics, but Wall Street doubts it can sustain this pace. If AI emerges as less of a big-payoff game and more of a “standard feature,” shares could go on sale.
2. C3.ai (Ticker: AI)
Potential Drop: ~71% (Current price: $45; Analyst target: $13)
Why It Soared
C3.ai builds enterprise AI platforms that streamline data integration and model training. A high-profile tie-up with Amazon Web Services boosted investor confidence.
What Analysts Warn
• Morgan Stanley flags slowing customer adds and elongated sales cycles. That combo often precedes a revenue lull.
• With a forward price-to-sales ratio north of 30, C3.ai ranks among the priciest cloud names. Any hint of miss could spark a hefty reversal.
• Their $13 target suggests shares could tumble 71%.
Bottom Line
C3.ai’s tools remain in demand, but growing pains and sky-high multiples make it vulnerable. If big clients pause or opt for in-house solutions, the stock could slide hard.
3. SoundHound AI (Ticker: SOUN)
Potential Drop: ~80% (Current price: $30; Analyst target: $6)
Why It Soared
SoundHound offers voice-AI for cars, speakers, and apps. Its public debut via SPAC drew a flurry of retail buyers, pushing the stock above $30.
What Analysts Warn
• Goldman Sachs notes that consumer voice tech is crowded. Giants like Apple and Google also chase this market.
• SoundHound still posts steep losses. Rising server and licensing fees eat into whatever slim profits it might chase.
• An $6 price target reflects an 80% plunge from current levels.
Bottom Line
Voice AI has promise, but SoundHound faces heavy competition and high burn rates. If quarterly results disappoint, retail traders could head for the exits fast.
3-Question FAQ
Q1: Why might these AI stocks collapse so dramatically?
High valuations, slowing growth, hefty R&D expenses, and rising competition all leave them exposed. When sentiment shifts, their stretched price multiples could trigger big falls.
Q2: Should I sell now to avoid losses?
Only you can answer that. Check your goals, risk tolerance, and time horizon. If you’re uneasy about steep corrections, consider trimming positions or setting stop-loss orders.
Q3: Are there safer AI plays to consider?
Yes. Look at large-cap names like Microsoft or Nvidia, which mix AI exposure with diversified businesses and strong cash flows. They tend to weather market swings better.
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