#ai-valuations

#ai-valuations

It's never fun for a new investor to hear that prospective returns moving forward are bound to be modest. Whether it's due to extended valuations, higher risks, or something else, that's just not what someone wants to hear as they seek to put new money into the financial markets after what's been a strong multi-year bull run. It hurts to be sidelined after the S&P 500 has risen 50% in two years or 85% in the last five years.

As the Wall Street Journal reports, the stock market has been showing marked signs of "fragility," with Nvidia slipping seven percent last week. Despite signs of an end to the ongoing federal shutdown buoying up some excitement, the AI chipmaker continued its plunge this week, sliding another three percent on Tuesday. Meta shares have also fallen almost 17 percent since its quarterly earnings report late last month, despitethe companybeating investors' expectations.

Markets are still concerned that AI valuations are stretched. Leading recent AI losses, Palantir ( NASDAQ: PLTR) dropped, even after beating earnings estimates with solid guidance to boot. EPS of 21 cents beat estimates of 17 cents. Revenue of $1.18 billion was above estimates of $1.09 billion. While impressive, the market has become nervous about Palantir's valuation - especially as it trades at 200x forward earnings.