3 AI Stocks Predicted to Drop 43% to 88% by Wall Street Analysts

Last week, the iconic Dow Jones Industrial Average and benchmark S&P 500 surged to record highs, while the growth-powered Nasdaq Composite came within a stone’s throw of eclipsing its all-time closing high from November 2021. Though growth stocks are most directly responsible for this move higher in the broader market, the more specific trend that’s spurring this rally is excitement surrounding artificial intelligence (AI).

AI uses software and systems to undertake tasks that would normally be done by humans. The key ingredient is machine learning, which allows AI-driven software and systems to effectively learn over time and become smarter and more effective at their tasks.

The beauty of AI is that it isn’t just grounded in the technology space. It has application in virtually all sectors and industries, which is why the analysts at PwC believe it can add an estimated $15.7 trillion to global gross domestic product by the turn of the decade.

However, not every Wall Street analyst is on board with the AI hype train. Based on the bottom-of-the-barrel price targets provided by select analysts, three of the highest-flying and/or widely owned AI stocks could plunge between 43% and 88%.

Nvidia: Implied downside of 43%

The first artificial intelligence stock that could quickly lose its luster, at least according to one Wall Street analyst, is the infrastructure backbone of the AI movement: semiconductor company Nvidia (NASDAQ: NVDA). According to analyst Gil Luria of D.A. Davidson, Nvidia is worth $410 per share, which as of its close at $721 on Feb. 9 implies 43% downside.

Though Luria acknowledges that Nvidia’s A100 and H100 graphics processing units (GPUs) are the undeniable go-to for high-compute data centers, he cautions against getting swept up by the short-term euphoria. Luria’s January 2024 note that set the $410 price target anticipates that Nvidia’s growth trends “will start reverting to the trend line within the next two to six quarters.”

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Every next-big-thing trend over the last 30 years has worked its way through an initial period of unsustainable hype. While this doesn’t mean that companies in the AI space won’t, eventually, be successful, it makes it highly unlikely that enterprise demand can match or surpass the already lofty expectations of investors.

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