Since the conclusion of the 2022 bear market, numerous stocks tied to the artificial intelligence (AI) sector have yielded impressive gains, reshaping technological investment narratives. Among these, Nvidia exemplifies extreme success with returns exceeding 1,640% from its mid-October 2022 trough. Nonetheless, such standout performance does not equate to a universal endorsement of all AI-related equities. Certain companies' stock valuations and business trajectories warrant a more critical examination, and three entities in particular—Palantir Technologies, C3.ai, and Rigetti Computing—emerge as cautionary cases for investors as 2026 unfolds.
Palantir Technologies: Sky-High Valuation amidst Strong Growth
Palantir Technologies, trading under the ticker PLTR, has been an extraordinary performer since 2022 lows, achieving gains of nearly 33 times its previous bottom. Its Artificial Intelligence Platform (AIP) has reportedly delivered remarkable productivity improvements to a range of clients, underscoring its technological capabilities.
Despite these achievements, Palantir's stock appears elevated to an extent that raises concerns about a potential bubble. Typically identified in hindsight, the warning signs emerge prominently in the company's valuation metrics. Currently, Palantir exhibits a trailing price-to-earnings (P/E) ratio marginally above 450, an indicator itself that might be dismissed as an anomaly. However, a forward P/E ratio around 270 combined with a price-to-sales (P/S) ratio exceeding 125 reinforce the narrative of a highly elevated valuation.
To place this in perspective, investors generally find sales multiples beyond a quarter of Palantir's P/S ratio to be prohibitive, amplifying the need for caution. Financially, the company demonstrated robust revenue growth during the first nine months of 2025, with a 51% increase year over year. Such performance undeniably supports a premium valuation. Yet the market’s pricing seems to embed near-flawless execution, leaving open questions regarding the potential for further upside in the immediate future.
C3.ai: Revenue Declines and Leadership Transition
C3.ai (AI) has attracted interest from investors for its extensive library of over 130 AI software applications aimed at accelerating AI adoption across industries. However, the company's trajectory faces complications, most notably stemming from leadership upheaval and waning financial metrics. In the summer preceding September, founder and CEO Thomas Siebel announced his decision to resign due to health considerations. His departure ushered in CEO Stephen Ehikian, who now confronts the daunting challenge of steering the company's turnaround.
One pressing issue confronting C3.ai is a marked reduction in revenue projections. Initially, fiscal 2026 revenue guidance ranged between $448 million and $485 million; however, by the second-quarter close in late October 2025, this had been sharply revised downward to a forecast between $290 million and $310 million. This adjustment aligns with observed revenue declines, with the first half of fiscal 2026 reflecting a 20% revenue reduction compared to the corresponding period the prior year.
Simultaneously, operating expenses continue to grow disproportionately relative to sales, contributing to an expanding net loss. The first two quarters of fiscal 2026 revealed losses of $221 million, notably higher than the $129 million lost in the same period of the previous year. These factors have culminated in the stock trading over 60% below its level from one year prior. While the price-to-sales metric has contracted to roughly 5, a two-year nadir that may seem attractive to some investors, the deteriorating financial outlook and transitional uncertainty dampen enthusiasm and increase investment risk.
Rigetti Computing: Quantum Challenges and Financial Strains
Within the emergent quantum computing arena, Rigetti Computing (RGTI) positions itself as a competitor leveraging faster technological development to advance next-generation AI applications. Nevertheless, speed has yet to translate into superior accuracy, a critical performance measure where Rigetti trails some rivals. The quantum computing market also encompasses smaller competitors like IonQ as well as major technology corporations including Alphabet and IBM, whose vast financial resources enable ongoing heavy investment in research and development.
In contrast to these tech giants, Rigetti faces financial constraints that prompt periodic share issuance campaigns necessary to sustain operations. The company's recent revenue figures reflect struggles as well; in the first nine months of 2025, revenue dropped to $5.2 million, a 39% decrease relative to 2024's comparable period.
This decline, coupled with a significant $149 million adjustment to the fair value of derivative warrant liabilities, resulted in a net loss nearing $198 million during the year’s first three quarters. This loss notably surpasses the $48 million deficit incurred in the same timeframe during 2024. Despite earlier gains propelled by an elevated stock price, Rigetti now trades nearly 60% below its October 2025 peak. Given shrinking sales figures and a price-to-book ratio of 22, investing in Rigetti presents heightened risk with uncertain reward prospects.
Conclusion
While the AI sector continues to attract investor enthusiasm, these three companies illustrate different facets of risk within the industry. Palantir’s lofty valuation, C3.ai’s revenue contraction and leadership shift, and Rigetti’s competitive and financial hurdles underscore the importance of scrutinizing fundamentals carefully amidst the broader AI boom. Market participants would be prudent to evaluate these factors closely when considering their portfolio positioning in AI and related technology spaces.