Palantir vs. Super Micro Computer: Are These AI Stock Giants Dangerously Overvalued?

Palantir Technologies and Super Micro Computer: An Overview

Palantir Technologies (PLTR) and Super Micro Computer (SMCI) have drawn significant attention as prominent artificial intelligence (AI) stocks. Since January 2023, Palantir’s stock surged roughly 1,900%, while Supermicro's climbed about 480%. Despite these impressive returns, some Wall Street analysts warn these stocks may be overvalued. For example, RBC Capital assigned Palantir a target price of $40, suggesting a potential 69% drop from its current $130 share price. Similarly, Goldman Sachs set a $24 target for Supermicro, implying a 50% downside from $48. Here’s what investors need to know about these companies.

Palantir Technologies: 69% Implied Downside

Palantir specializes in data analytics and AI software for commercial and government clients. It holds leadership status in decision-intelligence platforms, according to International Data Corporation, and Forrester Research recognizes its AI platform technology leadership. The AI market Palantir operates in is projected to grow at a 40% annual rate through 2028.

The company posted strong Q1 results, with revenue increasing 39% to $884 million—a seventh consecutive acceleration. Growth was particularly strong in the U.S. commercial and government sectors. Non-GAAP net income rose 62% to $0.13 per diluted share. Management raised full-year guidance, now expecting sales growth of 36% in 2025.

Despite solid execution and market position, valuation is a concern. Wall Street forecasts adjusted earnings growth of 31% annually through 2026, yet Palantir trades at an extremely high price-to-earnings ratio of 280. The price-to-sales ratio stands at 105, while no other S&P 500 company exceeds 35. Even if the share price fell by two-thirds, Palantir would remain the most expensive S&P 500 stock by this metric.

Given this, maintaining only small positions in Palantir is prudent. The stock is vulnerable to sharp declines if any negative news emerges.

Super Micro Computer: 50% Implied Downside

Super Micro Computer designs data center servers and storage solutions optimized for AI and high-performance computing. Its internal design and modular approach allow rapid product launches, often months ahead of competitors. In Q4 2024, Supermicro held 6.5% of global server sales, second only to Dell Technologies at 7.2%. It has also positioned itself as an early leader in AI servers, a market expected to grow 37% annually through 2030.

However, concerns exist about Supermicro’s competitive moat. The company assembles chips from other manufacturers like Nvidia rather than innovating its own components. Analysts at KeyBanc highlight that Supermicro has "structurally lower margins" due to fewer patents compared to peers.

Financially, Supermicro’s Q3 fiscal 2025 results were disappointing. Revenue rose 19% to $5.6 billion, but gross margin dropped 2 percentage points, and non-GAAP net income fell 53% to $0.31 per share. The company reduced its full-year revenue guidance twice within two quarters, now expecting 49% growth, down from 87% initially forecasted.

Wall Street anticipates 18% annual growth in adjusted earnings through fiscal 2026, making the current valuation of 21 times earnings seem reasonable. Still, Supermicro has missed consensus earnings estimates by an average of 17% over the past four quarters. While a 50% price drop is possible, history suggests volatility is likely.

Investors should prioritize companies with durable competitive advantages, and Supermicro’s business model raises questions in that regard.

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