Why Wall Street Sees 70% and 60% Downside Risks in Two AI Superstars During 2026

Two of 2025’s best-performing artificial intelligence stocks are now drawing intense scrutiny from major Wall Street strategists. Palantir Technologies (NASDAQ: PLTR) and Intel (NASDAQ: INTC) both delivered stellar returns last year—surging 145% and 84%, respectively—but several analysts believe both companies face significant headwinds that could trigger substantial corrections this year.

The central thesis from these market experts: the gains have gotten ahead of fundamental realities. For investors holding these stocks, understanding why top-tier analysts are turning cautious is essential. The projected downside scenarios are dramatic—and worth examining closely.

Palantir’s Extreme Valuation Problem Could Trigger a 70% Collapse

Palantir develops AI-powered data analysis software used by government agencies, financial institutions, and Fortune 500 corporations. The company has successfully transitioned from a pure-play government contractor into a diversified enterprise, with its U.S. commercial division now its fastest-growing segment.

Yet despite strong business momentum, the stock’s valuation has become virtually indefensible. According to analysis from January 20, 2026, Palantir trades at 169 times its projected earnings for the next 12 months—an astronomical multiple by virtually any measure. This exceeds even the premium valuations assigned to some of the world’s most dominant software and semiconductor companies.

An analyst at RBC Capital Markets has issued a sobering target: they believe PLTR could decline to around $50 per share, representing a 70% drawdown from its recent price near $171.

Here’s the problem: to justify its current valuation, Palantir would need to sustain triple-digit earnings growth rates consistently for many years—a scenario that’s extremely improbable. Even the most successful software companies eventually mature and see growth decelerate. The gap between what the market is pricing in and what’s realistically achievable appears massive.

Intel’s Manufacturing Struggles Create Risk of a 60% Pullback

Intel’s 2025 recovery was dramatic. After a difficult 2024, investor appetite returned as demand for data center processors remained strong throughout the AI infrastructure boom. The stock benefited from this renewed optimism, but Morgan Stanley remains skeptical.

Morgan Stanley strategists have established a bear-case price target of $19 per share for Intel—implying a 60% decline from its current trading price around $47.

The core issue: Intel still hasn’t solved its fundamental manufacturing challenge. The company continues to trail Taiwan Semiconductor Manufacturing (TSMC) significantly in chip production efficiency, technological sophistication, and reliability. Intel has faced repeated delays, unexpected cost overruns, and lower manufacturing yields (the percentage of functional chips produced).

Major customers prefer TSMC because the company has proven its operational excellence repeatedly. For Intel to sustain a turnaround, it would need to close the gap with TSMC—or at minimum, achieve competitive parity with Samsung. So far, there’s limited evidence this is happening at the necessary pace.

The Risk-Reward Picture Going Forward

The 70% decline scenario for Palantir and 60% downside for Intel represent tail risks in analysts’ views—but they shouldn’t be dismissed. Both stocks have experienced rapid appreciation, and both face genuine headwinds that could trigger re-rating events.

For current holders, the question isn’t whether these declines will definitely happen, but whether the risk-reward equation still makes sense. Given the stretched valuations in Palantir’s case and Intel’s persistent operational challenges, defensive positioning may warrant consideration before momentum shifts.

Investors evaluating entry points should carefully weigh both companies’ fundamental capacity to deliver the growth already priced into their market valuations.