Palantir and CoreWeave are growing faster than the S&P 500. Why are they being compared to meme stocks?

Shares of CoreWeave, a provider of cloud-based services for developing and training AI models, have soared 300% since March, while military and civilian AI developer Palantir is up more than 460% in 12 months. At the same time, their price/earnings multiples are highly inflated compared to companies in the S&P 500 index. While retail investors are buying up both companies in the hope that they will repeat the fate of Nvidia, one of the main beneficiaries of the AI boom, such rapid growth is causing some analysts to compare them to so-called meme stocks. Are the risks justified and what is needed to make the growth sustainable?

Since listing on the Nasdaq exchange in late March 2025, CoreWeave's market value has soared 300%, and Palantir's securities have appreciated more than 460% over the past year. By comparison, the main U.S. stock index, the S&P 500, has added 12.5% over the year. Palantir's stock price to projected revenue multiple is 71, the highest multiple among companies in the S&P 500 index, notes Bloomberg. For CoreWeave, which posted a net loss of $315 million in the first quarter, that multiple is 10, while the average in the S&P 500 index is about three, the agency adds. Nevertheless, such inflated valuations don't scare off retail investors, Bloomberg emphasizes. Palantir and CoreWeave are among the most popular stocks among Interactive Brokers' clients, the agency adds.

Investors are betting on Palantir and CoreWeave in the hope that these companies will repeat the success of Nvidia - one of the most influential companies in the world - on the wave of artificial intelligence boom, Bloomberg notes. Market participants have other reasons to buy securities of both companies. For example, Nvidia disclosed last month that its stake in CoreWeave stock is larger than the market expected. CoreWeave has also expanded its partnership with OpenAI and entered into two agreements with AI solutions provider Applied Digital. Palantir, on the other hand, has given strong revenue forecasts in recent quarters and is hoping for new contracts with the U.S. government. Bloomberg analysts expect CoreWeave's revenue to more than double this year, while Palantir's could grow 36%, thanks in part to strong sales of AI-based solutions.

Against the backdrop of such rapid growth, the question arises whether investors are overpaying for the companies' securities. It is their overboughtness in spite of inflated multiples that resembles so-called meme stocks - stocks whose rapid growth is explained by excitement among retail traders rather than real financial performance. One such example is video game retailer GameStop, whose stock is now 66% below its 2021 peak. However, unlike GameStop, which faced serious challenges in the pandemic, demand for Palantir and CoreWeave's services is clearly higher, Bloomberg emphasizes. Nevertheless, investors have already gotten burned on similar AI bets, the agency adds. For example, Super Micro Computer shares more than quadrupled last year, but then collapsed 80% due to weak reports. AI companies BigBear.ai Holdings and SoundHound AI have also seen similarly sharp spikes and drops amid higher trading volumes.

«Retail traders are getting bolder in getting into highly volatile assets, from small-cap stocks to speculative themes in artificial intelligence,» states Marco Iacchini, senior vice president of research at Vanda Research. Still, Interactive Brokers Group chief strategist Steve Sosnick warns: the higher the upswing, the harder the fall. «Investors are ignoring fundamentals just to jump on the last wagon,» he notes. In Sosnick's view, for this trend to continue, companies need new capital injections, otherwise growth will be unsustainable.

«Obviously meme investing is back in vogue, but by playing with these stocks, you're playing with fire,» agrees Gene Munster, co-founder and managing partner of Deepwater Asset Management. - That's why we won't invest in CoreWeave. The valuation is too, too inflated - it can't suit us.»