Investors Believe Overvaluation Is One of the Biggest Risks to the AI Story. Here Are 2 AI Stocks With the Frothiest Valuations.

Core Insights - Palantir and CrowdStrike are identified as two of the most expensive AI stocks, with investor concerns primarily focused on valuation despite a general interest in AI stocks for 2026 [1] Palantir Technologies - Palantir's stock trades at a forward price-to-sales (P/S) ratio of 67 times 2025 analyst estimates and 49 times 2026 consensus, significantly exceeding the median enterprise value-to-sales multiple of around 20 times for software stocks in 2021 and 2022 [2] - The company has experienced accelerating revenue growth, reaching 63% last quarter, driven by increased adoption of its Artificial Intelligence Platform (AIP) among U.S. commercial customers [4] - Palantir's customer count increased by 45% in Q3 2025, and its net dollar retention rate is at 134%, indicating strong growth from existing customers [5] - The U.S. government, as Palantir's largest customer, is also expanding its contracts as it modernizes its defense and intelligence capabilities [6] - Despite its growth potential, the stock is considered overvalued, with historical examples of major tech companies experiencing significant stock price declines before eventual recoveries [7] CrowdStrike - CrowdStrike's stock trades at a forward P/S multiple of nearly 25 times the fiscal 2026 consensus and 20 times fiscal 2027 forecasts, raising concerns about its valuation [10] - The company's annual recurring revenue (ARR) growth had been decelerating but accelerated to 23% last quarter, while total revenue rose 22% [11] - The introduction of the Falcon Flex licensing model has significantly boosted ARR for customers adopting it, with some seeing their ARR triple in Q3 [12] - For CrowdStrike to justify its current valuation, revenue growth needs to accelerate to the 30% range and maintain that level [13]