These tech giants have seen their stock prices climb based on the momentum in AI spending.
Analysts see the potential for slowing revenue growth for both companies, which could prompt the market to reprice the stock.
A company is increasing risk by using increasing debt.
10 Stocks We Like Better Than Palantir Technologies ›
The S&P 500 (SNPINDEX: ^GSPC) 2025 is set to close on a high note. The widely followed stock index sits near its all-time high after a three-year strong bull run. Technology stocks have been a major force in the index’s rise, fueled by heavy technology spending on new artificial intelligence (AI) data centers and investor optimism about the potential for AI to boost earnings.
But some of the biggest companies leading the stock market may have gotten ahead of themselves. Investors are paying a premium price based on unrealistic expectations for sales and earnings growth, even as AI spending continues to grow. As a result, some Wall Street analysts see significant downside to the bull run’s biggest winners. Two incredibly popular stocks are worth highlighting.
Palantir Technologies (NASDAQ: PLTR ): RBC Capital has a $50 price target, representing a 74% downside from the stock price as of this writing.
CoreWeave (NASDAQ: CRWV ): DA Davidson has a $36 price target, representing a downside of 54% from the stock price as of this writing.
Here’s why analysts are so bearish on these popular stocks and why readers may want to avoid them.
Palantir helps businesses make sense of all the data they collect and generate. With the increasing amount of data generated in everyday businesses, the total addressable market for Palantir is huge. And it took a major step to capture the potential market with the launch of its Artificial Intelligence Platform (AIP) in 2023.
AIP allows Palantir users to take advantage of greater language model capabilities. This enables them to interact with their data and Palantir models using natural language. This significantly reduces the technical expertise required to get the most out of the software and expands its use cases across enterprises. Management points to AIP as the reason for its rapid revenue growth and profitability.
Last quarter, Palantir produced revenue growth of 63%, with US commercial revenue growing 121%. As of this measure, Palantir is exhibiting significant operating leverage. Adjusted operating margin for the quarter came in at 51%. This gives Palantir a score of 40 out of 114 (revenue growth and operating margin). The rule suggests that any number above 40 is considered worthy of investment.
To be sure, Palantir is exhibiting extremely impressive growth, indicating that there is a large addressable market for it to capture. But investors don’t just want to buy big companies; They want to pay a fair price. It’s hard to argue that Palantir’s current stock price is fair value. Its forward P/E ratio of 268 and price-to-sales ratio of over 100 are both astronomically expensive. The market is pricing Palantir as if revenues will accelerate forever. Analysts at RBC Capital warned that multi-year US commercial contracts could drive demand. So, a decline in revenue growth won’t be all that surprising in the near future.
CoreWeave builds and outfits data centers and leases capacity to customers Microsoft, NvidiaOpenAI, and Meta Platforms. The company is growing rapidly, with revenue up 134% in the last quarter.
CoreWeave is highly leveraged, though. It signs large contracts before it has the capacity to serve its customers. It uses those contracts as collateral for borrowing, which it uses to finance new data centers, servers, and equipment. As a result, it now has $14 billion in debt on its balance sheet, double the amount from last year.
Many point to strong growth in revenue and its faster backlog growth as reasons why CoreWeave’s debt strategy is sound. CoreWeave’s revenue backlog climbed to $55.6 billion at the end of last quarter. It has more than doubled in six months.
But that backlog is no guarantee of revenue. Many of its customers may reduce or eliminate their contracts. And any slip-up can result in lost revenue opportunities. That’s why investors sent shares lower after management reported that one of its data center developers was experiencing supply chain delays. If CoreWeave doesn’t have the capacity, it can’t rent it.
But there’s another problem with CoreWeave’s reliance on debt, as DA Davidson analyst Gil Luria pointed out. Unit economics just doesn’t make sense. CoreWeave is paying more in interest than in operating income. The company generated $217 million in adjusted operating income last quarter. Operating margin narrowed significantly by five percentage points to 16%. Meanwhile, its interest expense topped $310 million. CoreWeave needs to show expanding operating margins to scale profitability, Luria argues. Otherwise, borrowing more will only lead to bigger losses.
Even after the decline in the stock following management’s revised outlook for the fourth quarter, there is still significant risk to investing in CoreWeave. Another delay in its data center, a pullback in spending from a big customer, or a further decline in its margins could send the stock even lower.
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Adam Levy has positions at Meta Platforms and Microsoft. The Motley Fool has positions on and recommends Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. Motley Fool has a disclosure policy.
2 Incredibly Popular Stocks to Sell Before Declining 54% to 74% in 2026, According to Select Wall Street Analysts was originally published by The Motley Fool.
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