Investors Worry Over Palantir and Tesla Amid AI Struggles

Investor concerns mount as Palantir and Tesla face declining growth rates and high valuations. The AI-related stocks are struggling to maintain market confidence amidst political and economic pressures.

Date: 18-03-2025

AI Rating: 4

Investors are currently facing significant concerns with Palantir Technologies (NASDAQ: PLTR) and Tesla (NASDAQ: TSLA) as both companies grapple with declining growth metrics and inflated valuations.

**Palantir Technologies** has seen its stock price dive 36% from its high of $125 in February. This decline can be attributed to the fading excitement surrounding the integration of AI large language models into its platforms and reduced governmental spending, as approximately 42% of its revenue stems from government clients. Despite sales growth at 29% for 2024, this figure is significantly lower than the 47% growth in 2020, which many had expected to be enhanced by the AI boom. The company is facing pressure from considerable stock-based compensation, which comprised 74% of adjusted EBITDA in Q4, indicating potential issues with profit margins.

**Tesla**, on the other hand, has faced reputational harm, notably in European markets, where sales fell drastically. The company's P/E ratio of 118 casts doubt on its valuation against a backdrop of slowing sales and reputational damage. The stock's performance is further hindered by political involvement and competition within international markets, particularly in China, where it sold over 657,000 units in 2024. While a pivot to AI and self-driving technology could eventually provide new growth avenues for Tesla, the current challenges suggest a need for caution from investors.

Overall, the analysis indicates that Palantir's risk is higher due to more pronounced overvaluation issues compared to Tesla, which may eventually leverage its strengths in technology for better opportunities.

Stocks: PLTR TSLA