Few things garner the attention of investors on Wall Street quite like sky-high addressable markets -- and artificial intelligence (AI) fits the bill. The analysts at PwC have estimated that AI can add up to $15.7 trillion to the global economy by 2030, which would mean a long list of companies can be winners.
Although dozens of companies have benefited from the rise of AI, none have been the face of this technological revolution quite like Nvidia (NVDA 1.53%) and Palantir Technologies (PLTR +1.25%). Nvidia became the first public company to surpass the $5 trillion mark recently, while Palantir's shares have skyrocketed approximately 2,760% since the beginning of 2023.
But if there's a history lesson to be learned on Wall Street, it's that when things seem too good to be true, they often are -- and that's potentially worrisome news for this dynamic AI duo in 2026.
Image source: Getty Images.
Wall Street and investors love sustainable moats
Before looking ahead to 2026, let's lay the foundation of how Nvidia and Palantir became, arguably, Wall Street's most popular AI stocks.
The defining characteristic of both companies is their sustainable moats.
For Nvidia, it's all about the company's graphics processing units (GPUs). Its Hopper (H100), Blackwell, and Blackwell Ultra chips are the leading choice of businesses operating AI-accelerated data centers. According to select analysts, Nvidia has a greater than 90% share of the GPUs currently deployed in enterprise data centers.
CEO Jensen Huang is intent on maintaining this share. He's set an ambitious goal of bringing a new advanced AI chip to market annually, with Vera Rubin and Vera Rubin Ultra, which run on the all-new Vera processor, set to make their debuts in the latter halves of 2026 and 2027, respectively. This aggressive innovation timeline makes it unlikely that external competitors will be able to match Nvidia's hardware on a compute basis.
NASDAQ: NVDA
Key Data Points
Furthermore, Nvidia has its CUDA platform to thank for its success. CUDA is the software toolkit used by developers to maximize the potential of their Nvidia GPUs, which includes the training of large language models. CUDA acts as an anchor that keeps clients loyal to the Nvidia brand.
Meanwhile, Palantir benefits from the fact that there is no one-for-one replacement for its AI- and machine learning-driven software-as-a-service (SaaS) platforms, Gotham and Foundry.
The U.S. government and its allies use Gotham to oversee the planning and execution of military missions, as well as the aggregation and analysis of data. This has been Palantir's primary driver of sales and profit growth.
As for Foundry, it's a subscription-based SaaS platform that helps businesses streamline their operations by making sense of their data. With no large-scale companies offering similar products, Palantir's operating cash flow and double-digit sales growth are secure.
Although these competitive advantages are undeniable, history suggests a heightened probability that the bubbles could burst for both stocks in 2026.
Image source: Getty Images.
History hasn't been kind to next-big-thing technologies
Over long periods, some of Wall Street's hottest trends became game changers. For instance, the internet revolutionized how businesses market and sell their products.
But if there's one trait next-big-thing technologies share, it's the need for time to mature and evolve. While the addressable opportunities for the internet, genome decoding, nanotechnology, 3D printing, blockchain technology, and the metaverse have all been sky-high, each of these hyped innovations endured an early innings bubble-bursting event.
The reason bubbles pop is that investors overestimate how quickly new technologies will gain widespread adoption and be optimized by businesses and/or consumers.
On one hand, an argument can be made that the rise of AI and the dot-com bubble aren't comparable -- and to some extent, this is correct. Most internet-driven businesses in the late 1990s and early 2000s had no foundational operating segments to fall back on. This meant investors were bidding up money-losing and cash-burning businesses to unthinkable valuations. Many of the companies pioneering the evolution of AI have rock-solid foundations (i.e., several operating segments that were profitable before AI became the hottest thing since sliced bread).
NASDAQ: PLTR
Key Data Points
However, the dot-com bubble and the present AI revolution both share the similarity that businesses aren't close to optimizing these technologies. It took more than half a decade for companies to realize how to optimize the internet to boost sales and enhance their marketing efforts. Even with Nvidia forecast to generate $213 billion in full-year sales for fiscal 2026 (ended in January 2026), nearly 90% of which comes from its data center segment, businesses aren't particularly close to optimizing their AI solutions.
In other words, while the floor may be higher for AI stocks than what we witnessed a quarter of a century ago when the dot-com bubble burst, the same mechanics that led to a bubble-bursting event appear to be firmly in place for both Nvidia and Palantir.
Furthermore, historical valuation trends point to a bumpy road ahead.
In the 15 months leading up to the bursting of the dot-com bubble, some of the public companies that led the charge peaked at trailing 12-month price-to-sales (P/S) ratios that ranged from roughly 30 to 40. What history has shown is that no industry-leading company has been able to maintain a P/S ratio of 30 or above for any extended period over the last three decades.
NVDA PS Ratio data by YCharts.
With this bit of history in mind, Nvidia and Palantir ended the Dec. 12 trading session at P/S ratios of 23 and 120, respectively. Although Nvidia is below the aforementioned P/S ratio threshold of 30, which has proved unsustainable, it hit this mark as recently as early November.
As for Palantir, a P/S ratio of 120 can't be justified. Even with CEO Alex Karp raising the company's sales forecast on a near-quarterly basis, no upward surprise would be sufficient to justify the aggressive premium relative to the company's sales.
While historical precedent can't guarantee that directional moves will occur in any specific stock or major index, history does have a way of rhyming, more often than not, on Wall Street. This makes it a valuable teacher and suggests that a bubble-bursting event for Nvidia and Palantir is a very real possibility in 2026.
