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The artificial intelligence (AI) industry is currently under intense scrutiny, with some experts, like Apollo's Chief Economist Torsten Sløk, sounding the alarm over a potential bubble that could potentially dwarf even the infamous tech euphoria of the late 1990s. The concern is that the rapid rise in valuations of top AI companies could lead to unsustainable market conditions. On the other hand, outspoken AI bulls like Dan Ives of Wedbush and Hans Mosesmann of Rosenblatt have rushed to hike their price targets on high-flying AI stocks, suggesting that the upside potential from this transformative tech is still in its early innings.
Amidst this raging valuation debate, some of investors' favorite AI stocks have already exceeded the price targets set by analysts at brokerage firm Goldman Sachs (GS) - one of the most widely respected and closely followed firms on Wall Street. Here's a closer look at where these stocks are trading relative to Goldman's forecasts, and how that stacks up to what the rest of the analyst community is expecting.
1. Arm Holdings Stock
Arm Holdings Plc ADR (ARM) is a global semiconductor and software design company, pivotal in the tech industry for its energy-efficient processor designs. ARM's technology is the foundation of a myriad of electronic devices, from smartphones to sensors, and is increasingly important in the Internet of Things (IoT) and AI sectors.
Following its reintroduction to public markets last year, ARM's stock has been ramping higher. The shares have rallied 75% on a YTD basis.
When it comes to earnings, ARM has been outdoing itself, beating the Street's expectations in recent quarters. In its Feb. 7 report, ARM topped consensus estimates by announcing adjusted EPS of $0.29 on $841 million in revenue. Plus, the stock got an additional boost last month after none other than Nvidia (NVDA) disclosed an investment worth $147 million in the chip company.
Analysts are giving ARM a thumbs-up, with a consensus rating of “Moderate Buy” among the 23 in coverage. Out of this group, 13 are leaning toward a “Strong Buy,” with 9 saying “Hold” and 1 suggesting a “Strong Sell.”
Goldman's price target for ARM is $95, which is a discount of 28% from current levels - even with the shares down more than 6% this afternoon. On the other hand, the Street-high price target for ARM checks in at $180, implying expected upside of more than 35%.
2. Palantir Technologies Stock
Palantir Technologies Inc. (PLTR) is an AI software specialist that's in the spotlight for its advanced data analytics platforms, Palantir Gotham and Palantir Foundry. These tools are not just about crunching numbers; they're about making sense of massive datasets for clients ranging from government agencies to private sector clients, like healthcare providers.
This week, PLTR stock popped sharply higher after the company secured a new $178 million contract with the U.S. Army to develop AI-powered deep sensing capabilities for enhanced intelligence gathering. The contract is for the development and delivery of the Tactical Intelligence Targeting Access Node (TITAN) ground station system, which uses data collected by sensors to pinpoint targets.
Previously, in February, Palantir announced a collaboration with a major aerospace company, Voyager Space, to bring advanced data analytics to the aviation industry.
On a YTD basis, Palantir stock is now 51% higher - and over the last 52 weeks, the shares have more than tripled.
The AI software company reported EPS of $0.08 for Q4 of 2023, which arrived in line with consensus estimates, but quarterly revenue of $608.35 million comfortably beat expectations. Commercial revenue was up 32% for the period, while government revenue ticked up 11%.
Analyst sentiment towards PLTR is tepid, at best, with a consensus “Hold” rating. Out of 14 analysts offering recommendations, 2 suggest a “Strong Buy,” 1 calls it a “Moderate Buy,” 6 are sticking with “Hold,” 1 deems it a “Moderate Sell,” and 1 says “Strong Sell.”
The mean target price for PLTR is $19.23, about 26% below current levels. Goldman Sachs set its price target even lower, at $12 - implying expectations for PLTR stock to tumble about 54% from here.
