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Thursday's Bonus Story Is It Time to Trim Your Positions in These 2 AI Stocks?Written by Jordan Chussler. Published 9/16/2025. 
Key Points - AI stocks continue to be the backbone of the ongoing bull market, but they are also fueling the S&P 500’s historic concentration.
- As valuations surge, investors should revisit their portfolios and consider scaling out of some positions.
- These three mega-cap companies, which are heavily leveraged to the AI trend, present case studies about overextension.
As the AI trend continues to propel the major indices to new highs, concerns about overextension amid record valuations should prompt some investors to consider locking in gains on high-flying stocks. This year, the two top-performing sectors—tech and communication services—have climbed roughly 17% and 21%, respectively. Unsurprisingly, both are heavily leveraged to AI and house five of the Magnificent Seven stocks. While this isn't a call to sell your AI holdings outright, highlighting some of these companies' elevated price-to-earnings (P/E) ratios and stretched financials may help you decide whether now is the right time to scale back. Palantir's Concerning P/E Ratio Raises Red Flags Imagine a bull market so powerful, every single investor became a millionaire. Not by finding the next NVIDIA or Bitcoin, but by owning a simple index fund.
It sounds impossible. Yet it happened – just a short time ago. Now a legendary figure says: "Brace yourselves. It's about to happen here, in America. But fair warning – it could be the worst thing that ever happens to you."
This story has received little coverage in the press. But if history repeats, it could bump tens of millions of Americans into a 7-figure net worth practically overnight. Click here for the full story. Palantir Technologies (NASDAQ: PLTR) sports a forward P/E of about 200, which, although lower than its sky-high trailing 12-month (TTM) ratio of 531, remains alarming. In early August, amid a broader tech selloff, Palantir's shares plunged 18% before recovering on Sept. 5, recouping nearly 12%. However, these wild swings echo the volatility seen in NVIDIA (NASDAQ: NVDA). Since the start of 2023, NVIDIA—the world's largest public company by market cap—has surged almost 1,120%. Although NVDA has outperformed the broader market this year with a 29% YTD gain, that pales compared to its roughly 192% jump in 2024. Of course, Palantir isn't NVIDIA, but examining NVIDIA's historical P/E trends may offer insight. By April 2023, NVDA's TTM P/E had peaked at about 148. Today, the semiconductor giant's forward P/E sits at a more modest 40. Investors weathered several pullbacks during NVIDIA's ascent—a 19% dip in late March 2024, a 21% slide in early summer, another 21% drop later that season, and a 36% decline from last November to April—yet optimism prevailed. Palantir hasn't endured as many sharp selloffs, but it hasn't been smooth sailing since its first full-year profit in 2023. The stock fell nearly 17% from Dec. 20, 2024, to Jan. 10, 2025, and then plunged almost 38% between Feb. 14 and its YTD low on April 4. Palantir's federal contracts should continue to support revenue growth, but investors wary of ongoing volatility may want to lock in gains. Meanwhile, total liabilities have jumped 52%, from $819 million at the end of 2022 to $1.25 billion in 2024. Looking closer, PLTR's cash flow—a reliable measure of health—plunged 105%, from a positive $1.33 billion in Q4 2024 to negative $64 million in Q2 2025. On Wall Street, those numbers have dented confidence: Institutional ownership has slipped to 46%, while $29 billion in outflows over the past year have outpaced $13.6 billion in inflows. Analysts' average price target for Palantir sits at $136.61, implying around a 20% downside from today's levels. Oracle's Runaway Debt Raises Investor Concerns Oracle (NYSE: ORCL) may not command the same buzz as Palantir, but its $820.38 billion market cap underscores its strength. The company leverages its cloud infrastructure and enterprise software to deliver AI services and hardware for large-scale applications. Oracle is also undergoing a P/E reset, with its TTM multiple contracting from 70.3 to a forward P/E of 45.4. Earlier this month, ORCL soared 47% between Sept. 4 and Sept. 10, only to give back over 11% in the subsequent days. While volatility is par for the course in AI-related tech, ORCL shareholders should note several red flags. Earnings per share have slowed nearly 15% over the past two quarters, from $1.22 to $1.04. Substantial capital expenditures led to a negative $8.7 billion in investing cash flow in Q1 2026. Meanwhile, net cash and equivalents fell by $341 million that quarter, as interest expenses hover around $900 million per period. Total liabilities have climbed 54%, from $109.3 billion in 2022 to $168.4 billion in 2025. Institutional ownership has dropped to 42%, and outflows have outpaced inflows over the past 12 months. Analysts' consensus price target implies just a 1.6% upside from current levels.
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