AI Stocks: A Cautionary Tale

The recent enthusiasm for Artificial Intelligence (AI) stocks has, shall we say, been… spirited. It’s a bit like discovering that the universe isn’t merely expanding, but also has a surprisingly strong preference for bubble tea. Unexpected, and potentially messy. For a while, these companies enjoyed valuations that defied not only gravity, but also basic arithmetic. Now, however, a certain amount of… readjustment seems to be underway. A correction, if you will. (Although ‘correction’ implies something that can be fixed, and frankly, the fundamental laws of financial improbability are rarely amenable to repair.)

Software stocks, generally, took a bit of a tumble earlier in 2026, prompting a brief, but noticeable, existential crisis among several mid-level CFOs. The worry? That AI might, you know, disrupt things. (Which, from the perspective of a sufficiently advanced AI, is probably what it’s supposed to do.) Even after that initial shudder, some AI-related companies remain priced as though they’ve discovered the secret to perpetual motion – a claim usually accompanied by a detailed explanation involving hamsters and very small turbines. Wall Street, in its infinite wisdom (and occasionally, its abject terror), is starting to suggest that a further decline is… plausible. Specifically, two stocks are drawing particular scrutiny.

Palantir Technologies

Palantir (PLTR 3.21%) is, undeniably, a prominent player in the enterprise AI arena. Some analysts, however, are suggesting that investors might want to consider… relocating their capital. Brent Thill at Jefferies is one such individual. He maintains an “Underperform” rating, along with a price target that’s roughly 55% below the current level. The concern isn’t necessarily about the company’s performance – it’s been reasonably strong – but about the price tag attached to it. Currently, Palantir trades at around 84.1 times forward earnings. Which is, let’s be honest, a number that requires a dedicated team of accountants to verify. (And even then, there’s a lingering suspicion that someone accidentally added an extra zero.)

That said, Palantir’s recent results have been, objectively, impressive. Fourth-quarter revenue surged 70% year-over-year to $1.4 billion, largely driven by demand for its Artificial Intelligence Platform (AIP). They also closed contracts worth $4.3 billion, up 138% year-over-year. This suggests that someone, somewhere, is actually using the thing. The accelerating adoption of AIP is leading to larger deals, boosting profitability, with a GAAP net income margin of 43% in Q4. Supporters highlight AIP and the company’s ontology framework (which, in essence, translates physical reality into digital data) as competitive advantages. Whether these advantages justify the valuation is, of course, a matter of… perspective. (And possibly, a very large telescope.)

Fastly

Fastly (FSLY 5.14%) operates an edge cloud platform – which, in layman’s terms, means it helps deliver websites and digital content faster and more securely. As AI adoption grows, more automated traffic flows through Fastly’s network. This is, logically, a good thing. (Unless, of course, the AI decides it doesn’t want to flow through the network. In which case, we have bigger problems.)

However, some analysts remain… cautious. Fastly’s median target price is nearly 47% below its current level. Fatima Boolani at Citigroup has gone even further, suggesting a price target 62% below the current level. This suggests a level of skepticism usually reserved for claims of alien abduction. Fastly trades at over 70 times forward earnings – a valuation that implies either extraordinary growth or a profound misunderstanding of basic arithmetic. The company’s growth is also somewhat volatile, dependent on unpredictable customer traffic. They’ve even cautioned that the strong Q4 2025 demand might not repeat. And, to add to the complexity, they’re facing rising infrastructure costs, with capital spending expected to reach 10% to 12% of revenue in 2026.

The company’s financial performance is improving. Revenue grew 15% year-over-year to $624 million, non-GAAP gross margin reached 61%, and they delivered their first profitable fiscal year with non-GAAP net income of $19.7 million. This is, undeniably, progress. However, the combination of high valuation, execution risks, and high capital expenditure makes it a somewhat… speculative bet in 2026. In short, it’s a bit like trying to predict the behavior of a particularly capricious quantum particle. Possible, perhaps, but unlikely to be consistently accurate.

2026-03-23 07:02

Palantir Technologies

Fastly

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