2 AI Stocks Wall Street Says to Sell Before They Drop 55%

By Manali Pradhan, CFA – Mar 23, 2026 at 12:00AM ESTKey PointsSome Wall Street analysts expect shares of Palantir and Fastly to fall more than 55% from current levels.Both companies are delivering strong growth, but valuations may be running ahead of fundamentals.Palantir faces valuation risk, while Fastly carries valuation and execution risks.Artificial intelligence (AI) stocks have been among the market's best performers in the past couple of years. However, that surge has also pushed the companies' valuations to extreme highs, increasing the risk of a correction in the coming months. Image source: Getty Images. Software stocks have already wiped out more than $1 trillion in market value earlier in 2026 amid concerns that AI could disrupt the industry. But, even after that sell-off, some AI stocks are trading at stretched valuations that appear disconnected from the fundamentals. Wall Street analysts now see further downside in these two stocks, with some price targets implying declines of more than 55%.

Palantir Technologies Palantir (PLTR 3.29%) is a prominent enterprise AI stock that some Wall Street analysts believe investors should consider selling, despite its strong recent performance. Jefferies analyst Brent Thill is one of them. He has maintained an "Underperform" rating for the stock with a $70 price target, nearly 55% lower than the stock's last closing price (as of March 19, 2026). The concern is about the company's expensive valuation even after its latest results. Palantir trades at roughly 84.1 times forward earnings, leading some analysts to argue that the stock price has run far ahead of its fundamentals. ExpandNASDAQ: PLTRPalantir TechnologiesToday's Change(-3.29%) $-5.12Current Price$150.56Key Data PointsMarket Cap$360BDay's Range$149.09 - $156.6052wk Range$66.12 - $207.52Volume1.4MAvg Vol48MGross Margin82.37% However, Palantir's recent performance has been exceptionally strong. In the fourth quarter of fiscal 2025 (ending Dec. 31, 2025), the company's revenues surged 70% year over year to $1.4 billion, driven largely by strong demand for its artificial intelligence platform (AIP). The company also closed contracts worth roughly $4.3 billion in Q4, up 138% year over year. The accelerating adoption of AIP is driving customers to sign larger deals. This momentum is helping boost the company's profitability, with the company reporting a GAAP net income margin of 43% in Q4. Supporters also highlight AIP and the company's ontology framework (which relates clients' physical assets, interrelationships, and processes to their digital counterparts) as major competitive advantages that can sustain long-term growth, despite the high valuation. Fastly Fastly (FSLY 4.73%) operates an edge cloud platform that helps deliver websites, apps, and digital content faster and more securely by handling data traffic closer to end users. As AI adoption grows, more automated traffic, bots, and AI-driven workloads are flowing through Fastly's edge network. ExpandNASDAQ: FSLYFastlyToday's Change(-4.73%) $-1.25Current Price$25.20Key Data PointsMarket Cap$3.8BDay's Range$24.68 - $26.4852wk Range$4.65 - $27.59Volume20MAvg Vol10MGross Margin54.40% However, some Wall Street analysts remain cautious. Fastly's median target price of $14 is nearly 47% below its last closing price. Citigroup analyst Fatima Boolani has given one of the most bearish price targets in the past few months, at $10, which is 62% below the closing price at the time of this writing. Fastly trades at over 70 times forward earnings, which is a very high valuation level. The company's growth is also volatile, as it depends on unpredictable customer traffic. The company highlighted that the strong Q4 2025 demand may not repeat. Fastly is also facing rising infrastructure costs, with capital spending expected to reach 10% to 12% of revenue in 2026. But the company's financial performance is improving. In fiscal 2025 (ending Dec. 31, 2025), revenue grew 15% year-over-year to $624 million, non-GAAP gross margin reached 61%, and the company delivered its first profitable fiscal year with non-GAAP net income of $19.7 million. While Fastly's turnaround is encouraging, its combination of high valuation, execution risks, and high capex makes it a risky bet in 2026.Read NextMar 22, 2026 •By Patrick SandersPalantir Technologies Stock Has 1 Problem. Here's Why I'm Buying Anyway.Mar 22, 2026 •By Danny Vena, CPAThe Pentagon Just Dropped a Bombshell for Palantir Stock InvestorsMar 22, 2026 •By Geoffrey SeilerWhere Will Palantir Stock Be in 3 Years?Mar 21, 2026 •By Johnny RicePalantir Is Executing Perfectly.

History Says It Won't Be Enough.Mar 21, 2026 •By Geoffrey Seiler2 AI Stocks That Didn't Get the Memo That the Bull Market Hit a Speed BumpMar 21, 2026 •By Rick OrfordBetter AI Stock: Palantir vs. BigBear AIAbout the AuthorManali Pradhan, CFA, is a contributing Motley Fool stock market analyst covering technology, pharmaceuticals, medical devices, and industrial sectors. Manali brings prior experience as a healthcare analyst and team lead at Market Realist, a data equity analyst at Morgan Stanley, and a data analyst at Deloitte Financial Advisory Services. She holds a bachelor’s degree in computer engineering and a master’s in finance from Mumbai University.TMFManaBStocks MentionedPalantir TechnologiesNASDAQ: PLTR$150.68(-3.21%)-$5.00FastlyNASDAQ: FSLY$25.09(-5.14%)-$1.36*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.