The prevailing optimism concerning the S&P 500 – a surge of sixteen per cent last year, largely attributable to the current infatuation with artificial intelligence – is, shall we say, premature. Palantir Technologies, that purveyor of data analytics to governments and the slightly bewildered private sector, enjoyed a particularly vulgar return of one hundred and thirty-five per cent. Sandisk, however, positively wallowed in success, achieving a staggering five hundred and fifty-nine per cent. A performance, one suspects, unlikely to be repeated. Indeed, the market, in its infinite wisdom, now appears to anticipate a reversal of fortunes.
Wall Street, that notoriously prescient body, projects a divergence. Palantir, whilst still deemed worthy of attention, is assigned a median target price of two hundred dollars per share – a mere seventeen per cent uplift from its current valuation. Sandisk, conversely, faces a potential decline of twenty-three per cent, its shares currently trading at a rather optimistic four hundred and fourteen dollars. The implication is clear: buy the former, and discreetly, swiftly, sell the latter. One observes, with a certain detached amusement, the cyclical nature of these enthusiasms.
Palantir Technologies: A Valuation Most Peculiar
Palantir, as its devotees will assure you, constructs platforms for the discerning analyst. Its key innovation – ontology-based software – is, in essence, a sophisticated means of arranging data, and then convincing oneself that this arrangement constitutes insight. Use cases range from the mundane – forecasting retail demand – to the slightly unsettling – battlefield analytics. Forrester Research, in a moment of either generosity or delusion, recently ranked Palantir as the leading AI/ML platform. One suspects their analysts have not spent sufficient time examining the company’s accounts.
The problem, as it invariably is, lies in the valuation. At one hundred and seventeen times sales, Palantir is, to put it mildly, expensive. It could, theoretically, decline by sixty-five per cent and still remain the most expensive constituent of the S&P 500. Such exuberance is rarely sustained. Investors should approach with caution, or, ideally, avoid entirely. A small position, perhaps, for those with a taste for reckless speculation. One anticipates a correction, and it will not be gentle.
Sandisk: The Bubble Begins to Deflate
Sandisk, a manufacturer of data storage solutions, operates, like so many modern enterprises, through a complex web of joint ventures and shared research and development. Its partnership with Kioxia, a Japanese flash manufacturer, is presented as a strength. One suspects it is merely a means of distributing risk. The company has gained a marginal increase in market share, and two hyperscalers are currently testing its solid-state drives. This, naturally, is heralded as a breakthrough.
Recent financial results – a twenty-three per cent increase in revenue – are presented as evidence of robust growth. Non-GAAP earnings, however, have declined by a rather less palatable thirty-three per cent. Management anticipates a near-tripling of earnings in the next quarter, attributing this to the insatiable demand for flash storage driven by the construction of artificial intelligence data centers. A supply shortage, naturally, is conveniently blamed. The familiar refrain.
Wall Street, predictably, forecasts an annual earnings growth rate of seventy-nine per cent through fiscal 2029. This yields a present valuation of one hundred and seventy times earnings. A figure that, even by the standards of Silicon Valley, is bordering on the absurd. JPMorgan analysts, to their credit, suggest that the current supply-constrained environment is a harbinger of a peak. A sensible observation, largely ignored.
Indeed, projections for NAND flash memory sales indicate an annual growth rate of fourteen per cent through 2030. A figure significantly lower than Wall Street’s optimistic forecasts. The market, one suspects, will eventually correct. Shareholders with substantial positions should consider a discreet, and expeditious, reduction. The stock has already enjoyed a rather remarkable ascent – seventy-four per cent in January alone. Such momentum is rarely sustainable. It is, in short, a bubble waiting to burst.
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2026-01-18 12:53