More than 30 years ago, the advent and proliferation of the internet opened new doors for businesses and changed corporate America forever. It also spurred the retail investor revolution by breaking down information barriers that had existed between Wall Street and Main Street for over a century.
The rise of artificial intelligence (AI) is the next leap forward investors have been waiting for — and Nvidia (NVDA 0.38%) and Palantir Technologies (PLTR 0.28%) are leading the charge.
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Since the start of 2023, shares of Nvidia and Palantir have skyrocketed by approximately 1,400% and 2,040%, respectively, translating into $5 trillion in market value added to Nvidia. But while the AI revolution’s dynamic duo continues to blow Wall Street’s projections out of the water, the latest $120 billion warning from this pair simply can’t be ignored.
Nvidia and Palantir are the faces of AI’s evolution
Wall Street’s largest public company, Nvidia, is firing on all cylinders. Last week, it announced record fiscal first-quarter sales of $81.6 billion, with data center revenue up a staggering 92% from a year ago. The proof is in the pudding that Nvidia’s graphics processing units (GPUs) are the clear top option for businesses.
Nvidia’s gross margin is also holding firm around 75%. Despite growing external and internal competition, the company’s GPU pricing power hasn’t faded at all.
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Whereas Nvidia is dominant on the hardware front, Palantir is crushing it on the applications side. Both of its core software-as-a-service platforms, Gotham and Foundry, are AI-driven. Palantir’s U.S. revenue more than doubled in the first quarter from the previous year, with CEO Alex Karp increasing his company’s full-year sales growth forecast from 61% to 71%.
With no large-scale competitors to Gotham, Palantir has one of the clearest growth runways on Wall Street.
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This $120 billion warning should raise some eyebrows
But despite their stellar operating results, shares of Nvidia and Palantir both fell the day following their earnings release. The $10.12-per-share decline in Palantir stock worked out to a $24.3 billion haircut. Meanwhile, Nvidia’s $3.96 drop translates to $95.9 billion in lost market value. Collectively, Nvidia and Palantir shed $120 billion after their earnings reports, and it’s a clear warning to Wall Street that investors’ AI expectations are too lofty.
Though the long-term outlook for AI is bright, every game-changing technology since the internet has endured an early stage bubble-bursting event. Bubbles form and subsequently burst because investors consistently overestimate the pace of technological optimization. We’re still a long way from businesses optimizing AI solutions to maximize sales and profits.
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We’re also potentially witnessing valuation fatigue with the faces of the AI revolution. Palantir started 2026 with a price-to-sales (P/S) ratio above 100, while Nvidia topped a P/S ratio of 30 as recently as November 2025. Historically, P/S ratios over 30 have alerted investors to potential bubbles.
And let’s not overlook that the AI-driven stock market is historically pricey. The S&P 500‘s Shiller Price-to-Earnings Ratio recently exceeded 42 for only the second time in 155 years. The last time stocks were this expensive was in the months preceding the dot-com bubble, which eventually slashed the Nasdaq Composite by 78%.
AI stocks like Nvidia and Palantir are likely to be hit hardest if/when a correction or bear market materializes.
