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Core AI Stocks Facing Significant Risks
In the latest earnings season, 287 out of 500 S&P 500 companies mentioned artificial intelligence (AI), a significant increase from less than 100 at the end of 2022. This surge in discussions around AI has prompted rising stock valuations, yet analysts warn that some AI stocks may be overvalued and face potential declines of up to 75%.
CoreWeave (NASDAQ: CRWV), a company specializing in GPU server rentals for AI developers, has major ties to Nvidia, which owns approximately 7% of CoreWeave. However, it relies heavily on Microsoft for 71% of its revenue, raising concerns about its growth sustainability. HSBC analyst Abhishek Shukla has estimated a price target of $32 for CoreWeave, representing a 75% decline from current levels. In contrast, Palantir Technologies (NASDAQ: PLTR) reports a 48% annual sales growth but is facing scrutiny for its high valuation, trading over 100 times forward sales and 275 times forward earnings. RBC Capital has set a price target of $45 for Palantir, indicating a potential 75% drop as well.
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