Nvidia and Palantir Are Down 37% and 41% From Their Respective All-Time High -- but It Isn't Time to Buy Just Yet

Core Insights - The rise of artificial intelligence (AI) has significantly influenced market performance, particularly for companies like Nvidia and Palantir, but their current valuations and market conditions suggest caution for investors [1][4][19] AI Market Potential - Analysts at PwC project that the AI market will reach a $15.7 trillion addressable global market by 2030, indicating substantial growth opportunities for businesses involved in AI hardware and applications [3] Company Performance - Nvidia and Palantir have been at the forefront of the AI revolution, with Nvidia's market value peaking at over$3 trillion and Palantir's shares experiencing a nearly 2,000% return over two years, but both companies have seen significant declines in their stock prices recently, with Nvidia down 37% and Palantir down 41% from their all-time highs [4][5] Historical Context of Bubbles - Historical trends show that next-big-thing technologies often experience bubble bursts, with investors typically overestimating early adoption rates and utility, leading to significant corrections in stock prices [6][7][8] Backlogs and Demand - Despite recent stock price declines, both companies maintain healthy backlogs, with Palantir securing multiyear contracts with the U.S. government and Nvidia experiencing overwhelming demand for its GPUs, which may provide some cushion against immediate sales declines [9] Tariff Implications - The introduction of a 10% global tariff by President Trump could create operational uncertainties for Nvidia, particularly due to its ties with Taiwan Semiconductor Manufacturing, while Palantir may face reduced demand for its solutions outside the U.S. due to worsening trade relations [11][14][15] Valuation Concerns - Valuation remains a significant concern for both companies, with Palantir's price-to-sales (P/S) ratio reaching unsustainable levels of around 100 at its peak, while Nvidia's P/S ratio, although reduced, still exceeds that of its peers [16][17][18] Market Conditions - The overall stock market is historically expensive, entering 2025 with a high Shiller price-to-earnings (P/E) ratio, which has historically led to declines in major indices, suggesting that Nvidia and Palantir may face further downward pressure [19][20]