Artificial intelligence (AI) is widely viewed as the next big tech revolution—one that could add up to $15.7 trillion in global economic impact by 2030, according to PwC. While investor enthusiasm is fueling major gains for AI stocks, some Wall Street analysts are issuing sharp warnings: a few of these high-flyers may be heading for a steep fall.

Here are three scorching-hot AI stocks that select analysts believe could drop dramatically in the next 12 months:

1. Palantir Technologies (NASDAQ: PLTR)

Potential Downside: 72%

Palantir’s stock has skyrocketed over 2,100% since early 2023, backed by strong demand for its Gotham (government intelligence) and Foundry (enterprise data analytics) platforms. With a market cap of $352 billion, Palantir is seen as a leader in AI-based data operations.

But not everyone’s buying into the hype.

RBC Capital’s Rishi Jaluria recently raised his target from $11 to $40, still far below the current price near $149. Jaluria argues Palantir’s price-to-sales (P/S) ratio of 114 is unsustainable—even during the dot-com boom, few companies maintained a P/S above 40. He also cites concerns over Palantir’s limited scalability and overdependence on U.S. government contracts.

2. Super Micro Computer (NASDAQ: SMCI)

Potential Downside: 51%

Known for its AI-optimized server hardware, Supermicro has surged more than 1,100% over the past three years. The company benefits from demand for data center infrastructure and strong ties to Nvidia’s AI GPUs.

However, Goldman Sachs’ Michael Ng remains bearish, with a price target of $24—a 51% drop from current levels. Ng believes increased competition in AI servers will erode Supermicro’s pricing power and margins over time. Previous investor concerns following allegations of misconduct (since resolved) have also tarnished its premium valuation appeal.

3. SoundHound AI (NASDAQ: SOUN)

Potential Downside: 31%

SoundHound AI has seen its revenue soar 151% year-over-year, fueled by demand for its voice-recognition and conversational AI technologies across industries like hospitality, automotive, and finance.

Still, Northland Securities’ Michael Latimore has a hold rating and a price target of $8, suggesting 31% downside. His caution lies in SoundHound’s ongoing losses—including a widened adjusted operating loss and heavy cash burn. With profitability unlikely before 2027, and a current valuation at 23x forward sales, even small shifts in AI sentiment could batter the stock.

Bubble Risk Ahead?

History shows that every transformative technology—from the internet to cryptocurrencies—goes through an early speculative phase. Analysts caution that AI could be entering its own bubble, and valuations may not reflect actual earnings potential.

Investors chasing AI gains should look past the hype and carefully assess fundamentals. As select Wall Street voices warn, not all AI stocks are built to last—and some may be poised for a painful correction.