2 AI Stocks Wall Street Says to Sell Before They Drop 55%

Core Insights - Artificial intelligence (AI) stocks have experienced significant performance gains but are now facing high valuations that may lead to corrections in the near future [1] - Software stocks have lost over $1 trillion in market value due to concerns about AI disruption, with some AI stocks still trading at inflated valuations [2] Palantir Technologies - Palantir Technologies is identified as a leading enterprise AI stock, but analysts suggest it may be time to sell due to its high valuation [3] - Jefferies analyst Brent Thill maintains an "Underperform" rating with a price target of $70, indicating a potential decline of nearly 55% from its last closing price of $150.56 [3][4] - Palantir's valuation stands at approximately 84.1 times forward earnings, raising concerns about its sustainability [3] - Despite these concerns, Palantir reported a 70% year-over-year revenue increase to $1.4 billion in Q4 2025, driven by strong demand for its AI platform [5][6] - The company secured contracts worth around $4.3 billion in Q4, reflecting a 138% year-over-year increase [5] Fastly - Fastly operates an edge cloud platform that benefits from increased AI adoption, which is driving more automated traffic through its network [7] - Analysts express caution regarding Fastly, with a median target price of $14, suggesting a potential decline of nearly 47% from its last closing price of $25.20 [9] - Citigroup analyst Fatima Boolani has set a bearish price target of $10, indicating a 62% drop from the current price [9] - Fastly's valuation exceeds 70 times forward earnings, which is considered very high, and its growth is volatile due to unpredictable customer traffic [10] - In fiscal 2025, Fastly's revenue grew 15% year-over-year to $624 million, achieving its first profitable fiscal year with a non-GAAP net income of $19.7 million [11]