Investors should always consider valuations before making investment decisions.

The stocks listed here have risen by more than 300% in just the past 12 months.

Excitement around these businesses has sent them to absurdly high valuations.

10 stocks we like better than Palantir Technologies ›

If you ignore a stock’s valuation when you make a decision to buy it, you could be adding some significant risk to your portfolio. Valuations matter significantly, as buying at inflated prices could limit your future returns.

My favorite example of this is Microsoft. Did you know that if you’d held the stock since Jan. 1, 2000 (before the dot-com bubble crashed), your return would be worse than if you’d bought it 16 years later? The stock has risen by 860% since 2016, versus 813% since 2000.

I’m not saying you should try to time the market, but in some cases, you’re better off simply avoiding a highly priced stock because buying at elevated levels can limit your returns. You may be better off going with a more reasonably priced growth stock instead.

Three stocks that I wouldn’t touch today due to their grossly inflated valuations are **Palantir Technologies **(NASDAQ: PLTR), **Rigetti Computing **(NASDAQ: RGTI), and **Oklo **(NYSE: OKLO). Here’s why you should think twice before buying these stocks today.

At a market cap of $450 billion, Palantir Technologies is one of the most valuable companies in the world, even though it doesn’t have the financial performance to justify it. The data analytics company has an artificial intelligence (AI) platform that helps businesses improve and speed up their decision-making processes. It caters to a mix of both government and commercial clients, and it’s been generating strong growth on both fronts.

But here’s the problem. It trades at a price-to-earnings (P/E) multiple of more than 600. The company didn’t have a bad earnings report that skewed that multiple – that’s truly how overpriced it is. Even based on analyst expectations of how it will perform in the coming year, its forward P/E multiple is still over 200.

CEO Alex Karp’s no-nonsense attitude and focus on the long term have won over retail investors in droves. But even though the business is expanding at a fast rate of around 50%, there are growing concerns that AI-related spending could slow down. A recent study from MIT found that 95% of businesses aren’t having much to show for their AI investments.

If there’s any hint of a slowdown in AI spend, Palantir’s stock may have the furthest to drop, given its astronomical valuation.