When to Dump These AI Darlings: Wall Street Analysts Identify Two AI Stocks to Sell Before Major Corrections Hit

Over the past twelve months, Palantir Technologies (NASDAQ: PLTR) and Sandisk (NASDAQ: SNDK) have delivered eye-watering returns—up 128% and 1,280% respectively. Yet beneath these impressive gains lies a troubling reality: multiple Wall Street analysts now believe these high-flying AI stocks to sell are trading at valuations that don’t reflect the risks ahead. With Jefferies setting a 57% downside target for Palantir and J.P. Morgan projecting a 53% decline for Sandisk, investors holding these positions should take note.

The core issue isn’t whether these companies have strong technology or market positioning. Rather, it’s that the market has priced in perfection—and any deviation from that script could trigger significant corrections.

Palantir Technologies: A Formidable Platform Hiding Behind a Valuation Bubble

Palantir has rightfully earned recognition as a leader in AI-powered decision-making platforms. The company’s software stands apart due to its ontology-based framework, which allows clients to layer generative AI capabilities directly into their analytics workflows. This technical prowess is undeniable.

Yet here’s where investors encounter problems. Palantir trades at an astonishing 101 times sales—making it one of the most expensive software companies in the market. For context, AppLovin, the second-most-expensive stock in the S&P 500, trades at just 32 times sales. To justify this premium, Palantir would need to grow revenue at extraordinary rates indefinitely, which is unrealistic.

Yes, Morgan Stanley analyst Sanjit Singh recently praised Palantir’s nine consecutive quarters of revenue acceleration and highlighted its profitability leadership in software. But even this glowing endorsement doesn’t change the mathematics. At 101 times sales, the stock offers limited margin for safety. Brent Thill at Jefferies has set a $70 per share target price, implying 57% downside from current levels—a stark warning that the valuation has become untethered from fundamentals.

For investors considering whether Palantir belongs in their portfolio, the answer is increasingly “no.” The stocks to sell list should include Palantir, particularly for those who accumulated shares at today’s prices.

Sandisk: Benefiting Today, Vulnerable Tomorrow

Sandisk presents a different but equally concerning picture. The company is the fifth-largest NAND flash supplier and benefits directly from the AI-driven shortage of memory chips. With hyperscalers testing its products and another major customer planning tests in 2026, demand appears robust. Management projects the supply crunch will persist through the current year, driving triple-digit earnings growth.

The problem? Memory chips are inherently cyclical. Sandisk’s impressive near-term growth trajectory will inevitably give way to a supply glut—and when it does, flash memory prices will collapse. Yet investors today are pricing Sandisk at 205 times earnings, assuming this shortage never ends. That’s a dangerous assumption.

Harlan Sur at J.P. Morgan recently issued a $235 per share target, implying 53% downside risk. This isn’t pessimism for pessimism’s sake; it’s recognition that current valuations ignore the cyclical nature of the memory chip market. Once supply catches up to demand, the earnings growth story evaporates, and the stock will likely correct sharply.

Like Palantir, Sandisk belongs on the stocks to sell watchlist. The immediate tailwinds are real, but they’re also temporary.

The Bottom Line: When Valuations Exceed Reality

Both Palantir and Sandisk demonstrate why chasing hot AI stories can be costly. While their underlying businesses merit respect, the market has priced in growth scenarios that assume no disappointments. History shows this never ends well.

Investors holding these stocks should seriously consider trimming positions. Those contemplating entry should wait for more attractive valuations. In the meantime, the most prudent action is adding these stocks to sell to your portfolio review checklist and reassessing whether their risk-reward profiles align with your investment objectives.