The soaring AI stocks of CoreWeave and Palantir (PLTR) are starting to resemble meme stocks that are driven more by retail investor excitement rather than by fundamentals, according to Bloomberg. CoreWeave has nearly quadrupled since its scaled-down IPO in March, and Palantir is up over 460% in the past year. Investors are hoping for gains like Nvidia (NVDA), but there’s also risk that they could follow GameStop (GME), which is now down 66% from its 2021 peak. “Investors are ignoring fundamentals… the snapback can be substantial,” warned Steve Sosnick of Interactive Brokers (IBKR).
Confident Investing Starts Here:
- Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
Both companies are benefiting from strong AI demand. CoreWeave, which rents cloud-computing power and counts Microsoft (MSFT) as a major customer, briefly fell 17% last week before rebounding. Palantir, which sells AI-powered data analysis tools, is seeing solid demand, which includes more U.S. government contracts under the Trump administration. Furthermore, CoreWeave’s revenue is expected to more than double this year, while Palantir’s is projected to grow by 36%. However, valuations are sky-high, as Palantir trades at 71x sales, the priciest in the S&P 500 (SPY), and CoreWeave trades at 10x sales despite posting a $315 million Q1 loss.
Nevertheless, retail investors are still piling in. Interactive Brokers data shows that CoreWeave and Palantir are among the most heavily traded stocks by clients, alongside high-risk assets like leveraged ETFs. Separately, Vanda Research noted that there is a surge in retail interest in speculative AI stocks. Bulls can point to Nvidia’s investment in CoreWeave, a new OpenAI deal, and Palantir’s strong revenue forecasts. However, it is worth noting that some past AI-driven rallies have ended with big losses. “Meme investing is back, but it’s risky,” warned Gene Munster of Deepwater Asset Management.
Which AI Stock Is the Better Buy?
Turning to Wall Street, out of the two AI stocks mentioned above, analysts think that PLTR stock has less room to fall than CRWV. In fact, PLTR’s price target of $101.06 per share implies almost 23.4% downside risk versus CRWV’s 69%.
Looking for a trading platform? Check out TipRanks' Best Online Brokers guide, and find the ideal broker for your trades.
Report an Issue