Palantir entered 2026 trading at more than 100 times sales. By April 2 that had eased to 86, which a Motley Fool columnist called a level that “screams, ‘bubble!’” The piece, published April 8, predicts the AI stock run is closer to its end than its start.
The argument is not that AI is a fad. The column cites PwC analysts who foresee more than $15 trillion in global economic value from AI by the end of the decade. But investors have been burned before by next-big-thing technologies, it says, and four factors point to a bust.
Four warning signs
First, every game-changing technology has had a bubble-bursting event. The author concedes the dot-com comparison is imperfect, since Nvidia, for one, made solid profits from gaming and data-center chips long before AI took off. Still, he points to a shared pattern: after companies adopted the internet, it took more than half a decade to learn to use it well. Most businesses are nowhere near that point with AI, he writes, and investors tend to overrate how mature a new technology is.
Second, prices are high. Palantir shares have risen more than 2,200% since the start of 2023. The column says price-to-sales ratios above 30 have not been sustainable for companies at the front of a new trend. For the broader market, the S&P 500’s Shiller price-to-earnings ratio began the year above 40, the second-highest reading since January 1871. The two earlier times it topped 40, stocks later fell 49% (the dot-com bubble) and 25% (the 2022 bear market).
Third, scarcity will fade. Demand for AI GPUs has outrun supply and given Nvidia strong pricing power, and limited high-bandwidth memory supply has pushed up prices for memory makers such as Micron. But many of Nvidia’s biggest customers are building their own AI chips. The column concedes these are no match for Nvidia’s hardware, though they are cheaper and easier to get.
Fourth, the Federal Reserve. It has cut its target rate six times since September 2024, and lower rates make multibillion-dollar data centers easier to finance. The column argues that rate cuts may now stall. It blames the Iran war, which it says caused the largest energy supply disruption in history and pushed oil prices sharply higher. The Cleveland Fed’s Inflation Nowcasting tool estimated trailing 12-month inflation jumping to 3.25% in March from 2.40% in February. The author says the Fed has little reason to cut and might even consider hikes before year-end, while markets have already priced in lower rates.
If the Fed changes course, he writes, it could end the rally abruptly.
