The evolution of artificial intelligence (AI) has been the lead catalyst responsible for lifting the benchmark S&P 500 to all-time highs. Empowering software and systems with the tools to make split-second, autonomous decisions is a multitrillion-dollar opportunity that businesses don’t want to miss.
While most Wall Street analysts expect the AI revolution to increase corporate growth rates and push stocks higher, optimism isn’t universal. According to select Wall Street analysts, two of the hottest, high-flying AI stocks, Palantir Technologies (NASDAQ: PLTR) and Tesla (NASDAQ: TSLA), can lose more than half their value.
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Image source: Getty Images. Palantir Technologies: Implied downside of 54%
AI-driven software-as-a-service (SaaS) provider Palantir is one of the stock market’s most polarizing tech companies.
On the one hand, the company’s Gotham SaaS platform has no large-scale competition. The federal government and its immediate allies rely on Gotham to plan and execute military missions. With limited competition, Gotham is driving strong double-digit sales growth, with contracts often locked in over four or five years.
On the other hand, analysts like Brent Thill at Jefferies see a company that’s practically priced for perfection in an imperfect industry. Thill has a sell rating on Palantir and an $80 price target, implying downside of up to 54%.
While Palantir’s sustainable moat warrants a premium, history shows that no company has sustained a price-to-sales (P/S) ratio above 30 for an extended period. CEO Alex Karp’s company entered 2026 at a P/S ratio above 100 and closed out the Aug. 25 trading session at a trailing 12-month P/S ratio of 72. It’s unlikely that this valuation premium is sustainable, which suggests Thill’s low-water price target could one day become a reality.
Image source: Tesla. Tesla: Implied downside of 63%
But the potential disaster du jour among AI stocks, based on Wall Street’s price targets, comes courtesy of electric-vehicle (EV) maker Tesla. Wells Fargo analyst Colin Langan maintains a sell rating on Tesla stock and foresees shares heading to $130, which is 63% below its closing price on Aug. 25.
Although Tesla revolutionized the EV industry and has been profitable on a recurring basis for six years and counting, Langan has been critical of the company’s shrinking vehicle margin. Aggressive EV competition has prompted Elon Musk’s company to slash prices on several occasions. While these price cuts have eventually worked out inventory kinks, they’ve come at the detriment of the company’s EV margin.