The U.S. equities rally seems to be fizzling out. Over the past five days, the tech-heavy Nasdaq Composite has tumbled 4.3%, while the S&P500 has fallen by a smaller 2.4%. Anyone familiar with historical market movements would understand that, towards the end of July and into August, U.S. equities typically post a string of losses. According to Bloomberg, Goldman Sachs’s top tactical strategist Scott Rubner said, “I am not buying the dip,” pointing out that much of the “good” macroeconomic news and the possibility of rate cuts are already priced in. This means there could be little catalysts to keep equities going. Not to mention, U.S. stocks have rallied to increasingly higher and stretched valuation multiples.
While the incoming sell-off won’t last forever, there are still some stocks investors should consider avoiding. Certain stocks carry with them much hype that has led to a surge in their prices. Below are three overhyped stocks investors should cash out of before 2025.
Palantir (PLTR)
Palantir‘s (NYSE:PLTR) share price has rallied 66.4% since the start of the year, and the data analytics firm could very well extend its gains. However, as I have pointed out in a few articles in the past, analysts and enthusiastic investors have branded Palantir as a key artificial intelligence stock. Still, the company’s recent financial performance has failed to live up to the hype. First-quarter results for fiscal year 2024 underwhelmed investors because guidance came in lower than most analysts had expected. This should have put a balloon into the Palantir AI bubble and forced investors to rethink better justifications for Palantir’s valuation. Still, nevertheless, the company’s share price has continued to rally.
For those unfamiliar with Palantir, the firm develops and services the Gotham and Foundry data analytics platforms for the U.S. government and other agencies within the defense apparatus, on the one hand, and for enterprises across different sectors, including financial institutions and healthcare, on the other hand.
If Palantir’s new AI Platform continues not living up to the hype, it’s surely a stock to sell by 2025.
Apple (AAPL)
Apple (NASDAQ:AAPL) is one of the magnificent seven stocks, boasting a $3.4 trillion market capitalization. At the beginning of 2024, the iPhone maker’s shares were underperforming the market by a significant margin, for good reason. Apple failed to spark growth in its iPhone sales, and the company also had to worry about the resurgence of an old foe in China: Huawei. Huawei began to gain market share towards the end of 2023, extending into 2024. Apple’s market share in China dropped from 20% in the first quarter of 2023 to 15.7% in the first three months of this year. In contrast, Huawei’s market share ballooned from 9.3% to 15.5%.
Apple’s first-quarter results were also nothing to gloat about. Net sales declined 4.3% year over year. Investors have been gleeful about Apple’s announcement of new AI features in iOS and a new partnership with OpenAI to see ChatGPT integrated into the iPhone maker’s voice assistant, Siri.
Still, new AI features will probably not be enough to revitalize sales, as consumers have begun to feel fatigued a new smartphone iteration that’s has little meaningful difference with the prior version yet comes with a large price tag. You should probably exit Apple’s stock by 2025 if you’re a retail investor.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a Silicon Valley-based cloud networks services company. In particular, Arista’s cloud networking solutions consist of an Extensible Operating System (EOS), which Arista offers in combination with other network applications. Arista’s EOS is essential to helping networks work efficiently and dynamically. The company has also noted that EOS helps with the scalability and resilience of cloud networks. Moreover, Arista offers data center and cloud networking systems, including newer artificial intelligence (AI) ethernet switching platforms and a suite of value-added software solutions.
Arista’s development of AI network solutions has recently caught the attention of investors. The cloud networking solutions provider believes it can address the “at least $60 billion TAM in data-driven client-to-cloud AI networking,” according to its most recent earnings transcript. ANET shares have rallied 40.4% year-to-date, but its valuation is stretching, now trading at 41.5x forward earnings. Cashing out before 2025 would be a good idea if the company’s shares continue to balloon.
On the date of publication, Tyrik Torres did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.