AI Darlings Arm and Palantir Seen as Overvalued Despite Strong Growth
• Arm Holdings and Palantir Technologies are high-flying AI stocks that have soared over 50% in the past year due to strong demand for AI technology.
• However, Wall Street analysts think these stocks are overvalued, with average 12-month price targets around 20% below current levels.
• Arm trades at a forward P/E ratio of 78x, while Palantir trades at 72x expected earnings, which analysts view as unsustainably high valuations.
• The stocks have surged recently after beating earnings expectations, but growth rates don't seem to justify such premium valuations in analysts' view.
• While investor enthusiasm for AI remains high, the author agrees these stocks seem frothy and better AI investments can likely be found elsewhere.