Two Prominent AI Shares to Consider Shedding Before They Decline by 62% and 74%, as Suggested by Specific Wall Street Experts
Rewritten Article:
Palantir Technologies (PLTR) and Super Micro Computer (SMCI) are two prominent tech companies in the AI sphere, currently attracting Wall Street analyst attention. However, their target prices suggest a challenging year ahead, with potential downsides of 62% and 74%, respectively, as per RBC Capital's Rishi Jaluria and Susquehanna's Mehdi Hosseini, respectively. Let's delve into these tech giants to understand their strengths and weaknesses.
Palantir Technologies: Juggling High Expectations
Established in 2003, Palantir specializes in data analytics software. Its platforms allow customers to integrate data, train machine learning models, and apply AI to complex data sets, surfacing insights and enhancing decision-making. Palantir prides itself on faster operationalization of AI, enabling clients to transition from prototype to product more quickly than other solutions.
Analysts exhibit mixed opinions, with Forrester Research ranking Palantir as the leader in artificial intelligence and machine learning platforms. Meanwhile, Gartner has scored the company below several competitors in data integration tools. Its most recent report on data analytics didn't even mention Palantir.
Palantir reported impressive quarterly financial results lately. Customers increased by 43%, with existing customers increasing their spend by 20%. Consequently, revenue soared by 36% to $828 million, marking the sixth consecutive quarter of acceleration. Notably, non-GAAP net income surged 75%.
Wall Street anticipates Palantir's adjusted earnings will increase annually by 31% through 2026. This would make its current valuation of 255 times adjusted earnings seem high. Despite regularly outperforming analyst consensus, the current valuation may be challenging to justify even if earnings growth surpasses anticipated rates.
While it seems unlikely for Palantir shares to plummet 62% in a year, investors should remain cautious. Current shareholders may want to reassess their positions, especially as they represent significant portions of portfolios.
Super Micro Computer: Facing Regulatory and Competition Challenges
Founded in 1993, Super Micro Computer focuses on manufacturing servers and storage systems. It boasts a quick market presence by a few months following chip supplier launches, thanks to internal engineering expertise and product development "building blocks". The strategy underpins Super Micro's dominance in the AI server market, as per Counterpoint Research.
However, analysts like Mehdi Hosseini at Susquehanna express concerns over Super Micro's lack of proprietary advantage. He believes that larger competitors, like Dell, could eventually take market share in AI servers. Hosseini claimed that innovations predominantly occur upstream (e.g., at chipmakers like Nvidia or manufacturers like TSMC), while Super Micro is more of a contract manufacturer prepared to invest working capital.
Super Micro faced scrutiny following August 2022 allegations by short seller Hindenburg Research about accounting red flags, unreported related-party transactions, and sanctions/export control violations. Although a special committee found no evidence of wrongdoing, Super Micro remains out of compliance with the SEC.
The company has yet to publish its Form 10-K for fiscal 2024, nor its Forms 10-Q for the first two quarters of fiscal 2025. This means that shareholders have sparse access to externally audited financial results for an extended period, leading to an air of uncertainty surrounding the company's financial health.
Given the regulatory issues and ensuing uncertainties, investors should stay on the sidelines when it comes to Super Micro stock, and existing shareholders may benefit from considering position adjustments. With the expected filing of overdue annual and quarterly reports coming up, share price movements could be substantial in either direction.
- Given the challenging year ahead as suggested by RBC Capital and Susquehanna, investors might be cautious about their investing decisions in Palantir Technologies, despite the company's impressive financial results and growth potential in AI and machine learning.
- To effectively integrate data and apply AI, Palantir Technologies provides platforms that enable customers to train machine learning models, a feature that sets it apart from some competitors in the data analytics software market.
- In terms of finance, Super Micro Computer is dominated in the AI server market due to its quick market presence, but analysts express concerns about its lack of proprietary advantage and potential competition from larger companies like Dell.
- During a time when regulatory issues and ensuing uncertainties surround Super Micro Computer, investors may want to approach its stocks with caution, considering position adjustments or staying on the sidelines until the company publishes its overdue annual and quarterly reports.
