A Spot of Trouble: AI Stocks & The Market

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One does occasionally stumble across situations in the market that are, shall we say, less than ideal. The current enthusiasm for certain artificial intelligence ventures strikes me as precisely that. Palantir Technologies and Sandisk, both having enjoyed a rather giddy ascent, now appear to be perched precariously. One suspects gravity will eventually assert itself.

Brent Thill at Jefferies, a perfectly sensible chap, suggests Palantir might find itself trading at a more realistic $70 per share. A decline of 57%? Rather dramatic, of course, but not entirely unexpected given the current valuation. Harlan Sur at J.P. Morgan is equally unimpressed with Sandisk, proposing a target of $235 – a fall of 53%. One begins to wonder if these analysts have actually seen the numbers.

Palantir Technologies: A Most Expensive Game

Palantir, one gathers, develops platforms for sorting information – a useful enough pursuit, no doubt. They seem to specialize in sending engineers to fuss over bespoke workflows for their clients, which, while charmingly old-fashioned, does appear to generate a degree of client loyalty. Their decision-making framework, an ‘ontology’ as they call it, sounds frightfully complicated.

However, it is their foray into large language models that has truly captured the market’s imagination. They’re allowing clients to ‘supercharge’ this framework with generative AI. Forrester Research, ever eager to bestow accolades, has declared them a ‘leader’. One wonders if they’ve considered the price.

Sanjit Singh at Morgan Stanley is positively effusive, praising their revenue growth – nine consecutive quarters, no less! He claims they deliver the best growth and profitability in the software sector. A bold statement, and one suspects it’s fueled by a generous helping of optimism. Still, one must admit, the numbers are… arresting.

The problem, naturally, is the price. Palantir currently trades at 101 times sales. Quite frankly, it’s absurd. To put it in perspective, AppLovin, another perfectly respectable company, trades at a mere 32 times sales. The disparity is… noteworthy. One anticipates a correction. A rather substantial one, perhaps.

I wouldn’t be surprised to see Palantir shares lose at least half their value. The valuation is simply unsustainable. Prospective investors should steer clear, and current shareholders with substantial holdings might consider taking profits while they still can. It’s simply good sense, really.

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Sandisk: A Flash in the Pan?

Sandisk, it appears, manufactures data storage devices. Perfectly useful, I suppose, in this increasingly digital age. Their key partnership with Kioxia, a Japanese flash memory supplier, allows them to share costs. A sensible arrangement, though hardly revolutionary.

Their vertical integration – controlling the entire supply chain – is also commendable. It provides security, naturally, and allows them to optimize their products. One suspects, however, that such advantages are already factored into the price.

They’ve gained a percentage point of market share, and two hyperscalers are testing their products. All very encouraging, of course. But hardly a guarantee of continued success.

The current demand for AI infrastructure has created a shortage of flash memory, driving up prices. Sandisk has benefited, naturally. But such shortages are rarely permanent. The market has a tiresome habit of correcting itself.

Sandisk currently trades at 205 times earnings. Quite frankly, it’s preposterous. Wall Street anticipates a 79% annual increase in earnings. A charming prediction, but one that seems… optimistic. The valuation is simply unsustainable.

I wouldn’t be surprised to see Sandisk shares lose at least half their value, particularly when the supply of NAND flash memory begins to outpace demand. Prospective investors should avoid the stock, and shareholders with substantial holdings might consider trimming their positions. It’s merely prudent, darling. Merely prudent.

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2026-01-23 12:15