Wall Street analysts tend to be a decidedly optimistic bunch. Of the 503 stocks in the S&P 500 (^GSPC +1.20%) (there are more than 500 because some companies have multiple share classes), analysts rate 409 as buys or strong buys. As you might imagine, the artificial intelligence (AI) stocks that have propelled the market higher in recent years are among Wall Street's favorites.
However, this bullishness has its limits. There's an especially popular AI stock among retail investors that could plunge 70% or more, according to one Wall Street analyst.
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An AI favorite
The stock I'm referring to is Palantir Technologies (PLTR +2.45%), which been one of the hottest stocks on the market. Palantir has skyrocketed more than 23x since the beginning of 2023.
Sure, Palantir's shares have pulled back by a double-digit percentage from its recent high. However, the stock has still roughly doubled year to date. That's enough to rank Palantir as the best-performing member of the S&P 500.
NASDAQ: PLTR
Key Data Points
The excitement about Palantir stems primarily from the growing demand for its products. The company makes software for analysis, pattern detection, and AI-assisted decision-making. In the second quarter of 2025, Palantir's revenue jumped 48% year over year, and the company projects next quarter's revenue growth will be even higher.
Palantir CEO Alex Karp wrote to shareholders earlier this month, "For a start-up, even one only a thousandth of our size, this growth rate would be striking, the talk of the town." He added, "For a business of our scale, however, it is, we continue to believe, nearly without precedent or comparison." Karp thinks, "This is still only the beginning of something much larger and, we believe, even more significant."
The biggest Palantir bear on Wall Street
One analyst isn't on the Palantir bandwagon, though. RBC Capital's Rishi Jaluria is the biggest Palantir bear on Wall Street. His 12-month price target for the stock is a little over 70% below the AI software company's current share price, and that's after Jaluria raised his price target from $40 to $45 earlier this month.
Before Palantir's Q2 update, Jaluria wrote to investors that Palantir's "valuation seems unsustainable." Even after Palantir's strong earnings results, Jaluria pointed to the stock's "unfavorable risk-reward profile."
Several Wall Street analysts are concerned about Palantir's valuation with its sky-high forward price-to-earnings ratio (P/E) of 250. Three others, in addition to Jaluria, rated the stock as an underperform or sell in a survey of analysts conducted by LSEG in August. Another 17 analysts recommended holding the stock, with only four rating Palantir as a buy or strong buy.
However, Jaluria is much more negative about Palantir stock than his peers. The average 12-month price target for Palantir is only slightly below the current share price.
Jaluria isn't bearish about every AI stock, though. The RBC analyst thinks some companies will be bigger winners than others as AI adoption increases. He has especially singled out software leaders, including Microsoft and Intuit, as good picks.
Could Palantir really plunge more than 70%?
Could RBC's Jaluria be right that Palantir's share price could plunge more than 70%? Maybe. However, I suspect that his low price target is overly pessimistic.
Don't get me wrong -- I agree with Jaluria and other analysts who view Palantir as overpriced. The company's growth prospects -- even though they're impressive -- don't justify its stock valuation, in my opinion. I think Jefferies analyst Brent Thill is correct in stating that Palantir's premium multiple is "disconnected from even optimistic growth scenarios."
I suspect that we could see Palantir's share price fall well below the current level over the next 12 months. But I doubt that Palantir's share price will fall nearly as much as Jaluria predicts.
Mizuho analyst Gregg Moskowitz recently argued that Palantir's "uniqueness demands substantial credit," pointing to the company's ability to profit from AI, government digitization, and other trends. If he's right (and I think he is), it means that Palantir could have a higher floor than the stock's biggest Wall Street bears project.
