AI-related stocks 3over the years, 500% or more gains, overvaluation warning

Shares of AI-related companies such as Nvidia, Palantir and Broadcom have recently risen by 3over the years 500% or more. These returns reflect how quickly expectations for AI demand have been priced into stocks. The contributor first highlighted this point.

The contributor considered valuations excessive. In particular, they noted that Palantir’s price-to-earnings ratio exceeds 150. They viewed this figure as high and the downside risk as significant.

The contributor cited Warren Buffett’s principles. Invoking the principle, “Never lose money,” they said they would not enter an overheated market. They added that individual investors should proceed with caution.

He recommended not chasing overvalued growth stocks, but buying high-quality stocks at reasonable prices. This approach first considers the share price relative to earnings. He said he places importance on valuation stability.

The contributor made clear that he would not buy AI-related stocks. He recommended prioritizing valuation checks when making investment decisions. He explained that buying based solely on growth expectations is risky.

In summary, the contributor acknowledged the sharp rise in the AI sector while taking issue with current valuation levels. He cited Palantir as a representative example. The article warns of downside risks in overvalued stocks.