PLTR and SMCI: Wall Street's 60% Downside Call

Palantir Technologies (PLTR) and Super Micro Computer (SMCI) have been two of the most popular AI stocks since January 2023, surging 3,000% and 325%, respectively. But not everyone is convinced the rally can continue. This week, two prominent Wall Street analysts issued sell ratings with price targets implying massive downside.

Jefferies analyst Brent Thill slapped a sell rating on Palantir with an $80 price target, implying a 60% drop from its current $199 share price. Thill acknowledges Palantir's excellent fundamentals but argues the valuation—78 times sales, the highest in the S&P 500—simply doesn't make sense. He also worries the company may be underinvesting in future growth, pointing to its high margins as evidence.

Meanwhile, Susquehanna's Mehdi Hosseini recommends selling Super Micro with a $15 target, implying 57% downside from $35. Hosseini cites declining gross margins (from 13.8% in fiscal 2024 to 10.8% in fiscal 2025), a lack of durable competitive advantage, and serious corporate governance concerns. The latter includes federal charges against three individuals associated with Super Micro for allegedly diverting $2.5 billion in AI servers to China, and past accusations of accounting manipulation by short-seller Hindenburg Research.

It's worth noting that most analysts remain bullish on Palantir, with a median target of $223 (12% upside). But the bears are making a compelling case that the risk/reward is now skewed to the downside for both stocks.

For Palantir, the bull case rests on its unique software and accelerating revenue growth (up 93% in Q2, the 12th consecutive acceleration). But at 78 times sales, the stock is priced for perfection. Any slowdown in growth or margin compression could lead to a violent sell-off. The analyst's 60% downside target may seem extreme, but it highlights the danger of paying any price for growth.

Super Micro's issues are more fundamental. The company assembles servers using chips from Nvidia and AMD, but it lacks a moat—gross margins have been steadily declining despite booming AI demand. Worse, the governance concerns are serious. Federal charges related to export controls and past accounting irregularities raise red flags that could lead to fines, management turnover, or loss of customer trust.

For investors, these warnings are a reminder that not all AI stocks are created equal. While the AI infrastructure buildout is a powerful tailwind, companies with weak competitive positions or questionable governance can still destroy shareholder value. The market may be underestimating these risks, especially for Super Micro.

Even if the analysts' targets prove too bearish, the risk of a significant drawdown is real. Palantir could easily fall 30-40% in a market correction, while Super Micro faces company-specific risks that could accelerate losses. Investors should carefully assess their risk tolerance and position sizing.