The Nasdaq Composite is home to many of the world’s most innovative companies. As such, it’s a natural magnet for investors searching for the next generation of big stock market winners.
However, when I dig through the tech-heavy Nasdaq today, I see some shares with wild valuations. In particular, I’m giving these three a wide berth in June.
No margin for error
The first one is Palantir Technologies (NASDAQ:PLTR). This is the software firm that helps organisations and other companies use AI to turn fragmented data into operational efficiency.
For example, Palantir is helping the NHS reduce waiting times, while large utilities use predictive AI on its platform to map infrastructure risks. The mission-critical nature of such insights makes Palantir’s ecosystem very sticky.
In recent years, growth has been off the charts, including 85% revenue growth in Q1. Full-year 2026 revenue guidance has been nudged up to 71%, which would represent a significant acceleration on last year’s 56% expansion.
Meanwhile, Palantir’s net income margin has moved above 50%. Given this consistently amazing growth on both the top and bottom lines, it’s easy to see why the share price is up around 900% in three years.
However, the thing that continues to put me off is the price I would have to pay to invest. Palantir’s $377bn market cap translates into a forward-looking price-to-sales (P/S) ratio of 49 (based on expectations for $7.7bn in revenue this year).
At this valuation, there’s no room for any growth hiccups or slight disappointments. If there were, or if the wider Nasdaq sold off aggressively, the stock could get crushed.
True to its name
For similar reasons, I’m also avoiding Rocket Lab (NASDAQ:RKLB). This is a stock that has lived up to its name by rocketing around 2,450% in three years!
While growth is also strong here, with 21 successful rocket launches last year, I don’t think this justifies Rocket Lab’s $72bn market cap. That’s because revenue is only tipped to be around $911m this year. So the forward-looking P/S ratio is even higher than Palantir’s.
Meanwhile, the end-to-end rocket and space systems company is still not profitable. In Q1, it reported a net loss of $45m.
Looking ahead, analysts are pinning a lot of hope on its medium-lift Neutron rocket, which is due for its first test flight later this year. But we recently saw Blue Origin’s New Glenn test flight end in a huge fireball on the launch pad, so nothing’s guaranteed.
Frustratingly, I’ve watched Rocket Lab surge 350% higher over the past year. And while I’m bullish on the company — it’s launching record payloads and has a record $2.2bn order backlog — I can’t justify the crazy valuation.
I’ll wait patiently for a better entry point.
Space and AI combined!
Finally, I’m going to stay away from the SpaceX IPO later this month. Elon Musk’s rocket company fuses both space and AI in one company, so much excitement is guaranteed.
Last year, SpaceX generated $18.7bn in revenue but posted a net loss of $4.94bn due to heavy AI investments. With a reported $1.8trn IPO expected to take place, this indicates mind-boggling multiples.
At the risk of sounding like a broken record, the valuation is far too high for my liking. I’ll focus on stocks where I see more value.
Should you invest £5,000 in Palantir Technologies right now?
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Ben McPoland has no position in any of the companies mentioned.
