In the past year, Palantir Technologies (PLTR +0.34%) shares have added 128% and Sandisk (SNDK +0.43%) shares have advanced 1,280%. But certain Wall Street analysts think these artificial intelligence (AI) stocks are wildly overvalued.
- Brent Thill at Jefferies has set Palantir with a target price of $70 per share. That implies 57% downside from its current share price of $166.
- Harlan Sur at J.P. Morgan has set Sandisk with a target price of $235 per share. That implies 53% downside from its current share price of $500.
Here's what investors should know.
Image source: Getty Images.
Palantir Technologies: 57% downside implied by Jefferies' target price
Palantir develops analytics platforms that help commercial organizations and government agencies manage and make sense of complex information. The company deploys engineers that work directly with customers in building custom workflows, which has contributed to high retention rates. Also, its software is unique because it revolves around a decision-making framework called an ontology.
However, Palantir is truly formidable because its artificial intelligence (AI) platform allows clients to build large language models into analytics applications and workflows. Put differently, it lets clients supercharge the core decision-making framework with generative AI capabilities. Forrester Research recently ranked Palantir as a leader in AI decisioning platforms.
In a recent note, Sanjit Singh at Morgan Stanley praised Palantir for revenue growth that has now accelerated in nine consecutive quarters. "Palantir is not only delivering the best growth in public company software but also the best profitability in all of software," he wrote. "It is hard to find a better fundamental story in software."
However, Palantir shares currently trade at 101 times sales, a very expensive valuation for a company whose sales are forecast to grow at 43% annually through 2027. In fact, Palantir has the highest price-to-sales ratio in the S&P 500 several times over. AppLovin is second at 32 times sales.
I would not be surprised to see Palantir shares drop 50%+ in the future. The valuation is so rich that any bad news could lead to a steep drawdown. Prospective investors should steer clear of the stock right now and current shareholders with large positions should consider trimming their stakes.
NASDAQ: SNDK
Key Data Points
Sandisk: 53% downside implied by J.P. Morgan's target price
Sandisk designs and manufactures data storage devices based on NAND flash technology. Key to its business is a joint partnership with Japanese flash memory supplier Kioxia. Both companies realize cost efficiencies by splitting capital expenditures and research and development (R&D) expenses related to process technology development and memory wafer production.
Additionally, Sandisk's vertical integration -- meaning it controls almost every step of the supply chain across wafer production, chip packaging, and storage device design -- not only provides supply chain security, but also lets the company optimize its storage products in ways that other flash memory companies cannot.
Sandisk is the fifth-largest supplier of NAND flash technologies, but the company gained a percentage point of market share during the first half of 2025 and that momentum is likely to continue. Two hyperscalers recently started testing its storage products, while a third hyperscaler and major storage original equipment manufacturer (OEM) plan to start testing in 2026.
Importantly, demand for artificial intelligence infrastructure has led to an unprecedented supply shortage (and price increases) in flash memory and other storage products. Sandisk has been a major beneficiary and management expects the shortage to persist through the current year. That should drive triple-digit earnings growth in the coming quarters.
However, the memory chip market is notoriously cyclical and current supply constraints will almost certainly be followed by a supply glut, at which point flash prices will fall. Wall Street estimates Sandisk's adjusted earnings will increase at 79% annually through the fiscal year ending in June 2029. That sounds impressive, but it makes the current valuation of 205 times earnings look very expensive.
I would not be surprised to see Sandisk shares drop 50%+ in the future, particularly when the supply of NAND flash memory begins to outpace demand. Prospective investors should avoid the stock and shareholders with large positions should consider trimming.
