These Two Artificial Intelligence (AI) Stocks Are Poised to Soar by 1,050%, According to Wall Street Experts
For much of the past two years, no trend has captured investors' attention as much as… Artificial Intelligence (AI).
The potential for AI-based systems and software to learn over time without human intervention gives this technology the ability to improve productivity and alter the consumption habits of consumers and businesses across most sectors and industries. That’s why PwC researchers expect the potential global AI market to reach $15.7 trillion by the end of the decade.
So far, the semiconductor giant Nvidia (NASDAQ: NVDA) has been the undisputed beneficiary of the AI boom. But according to some Wall Street experts, two other AI stocks offer truly astonishing upside potential – up to 1050%!
Sorry, Nvidia, but you're yesterday's news.
Between early 2023 and shortly after Nvidia completed its historic 10-for-1 stock split in June 2024Its valuation skyrocketed from $360 billion to a peak of $3.46 trillion. While it was not the first $3 trillion company, we have never witnessed a market-leading company reach a $3 trillion value in less than 18 months.
Nvidia’s expansion has been truly exemplary. The company’s AI graphics processing units (GPUs) quickly became the preferred choice in enterprise data centers focused on running generative AI solutions and training large language models (LLMs). According to estimates by TechInsights analysts, Nvidia has accounted for 98% of GPUs shipped to data centers in consecutive years. Moreover, with its prized H100 order book, it is likely to maintain a near-monopoly market share in 2024.
The exceptional demand and otherworldly pricing power of Nvidia’s AI GPUs have been aided by the all-important CUDA software platform. CUDA is the toolset that developers use to create LLMs and get the most out of their Nvidia hardware. Think of CUDA as the hook that often keeps customers loyal to Nvidia’s ecosystem of products and services.
But all periods of euphoria eventually come to an end on Wall Street, and Nvidia may well be yesterday's news.
One of the biggest advantages Nvidia has is its pricing power. As demand for AI-powered GPUs outstrips supply, Nvidia chips have often been priced 100% or 300% higher than competing hardware. But that could soon change.
Several rival companies, including Advanced Microdevicesare ramping up production of their considerably cheaper AI GPUs, which are currently available. Companies looking to gain first-mover advantages may be strongly incentivized to use these rival chips.
Furthermore, Nvidia's four largest customers in terms of net sales are developing AI GPUs internally as add-ons or potential replacements for the AI GPU hardware they have ordered from Nvidia. It certainly looks like access to AI-accelerated data center “real estate” will become harder to come by in 2025 and beyond.
As new chips are launched and Nvidia’s largest customers supplement their needs with AI-powered GPUs developed in-house, Nvidia will likely see its pricing power and gross margin fade. In short, Nvidia’s best days are likely behind it.
But according to some Wall Street experts, this is not the case for two other AI stocks with high growth potential.
Tesla: Implied Upside Potential of 1,050%
The first AI stock that could surprise investors, in terms of upside potential, is the electric vehicle (EV) maker. Tesla (NASDAQ:TSLA)Ark Invest CEO and CIO Cathie Wood has estimated that Tesla stock will hit $2,600 per share by 2029. Based on its stock price at the time of writing, this would translate to an eventual increase of an incredible 1,050%.
The main thesis behind Ark’s Monte Carlo analysis is that autonomous ride-hailing services (i.e. robotaxis) will drive much of Tesla’s growth. Ark expects Tesla to generate $1.2 trillion in sales by 2029, 63% of which would originate from its robotaxi operations. What’s more, 86% of the projected $440 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) would come from autonomous ride-hailing services.
Even though Tesla is North America’s leading electric vehicle maker, and the company has done something no other automaker has accomplished in more than half a century (building a new automotive company from scratch to mass production), there are plenty of reasons to believe that Wood’s price target for the company won’t come close to reality.
The glaring flaw in Wood’s Monte Carlo analysis is that it assumes rapid adoption of Tesla’s robotaxi. However, Tesla does not have any autonomous robotaxi on public roads today and has not surpassed Level 2 full autonomy in years.
In comparison, Mercedes-Benz Tesla began selling vehicles with Level 3 self-driving technology in California and Nevada late last year, and has been developing hands-free Level 4 self-driving systems. Tesla has quickly lost its lead when it comes to self-driving capabilities and is very It is unlikely to meet the sales and EBITDA targets that Cathie Wood has set.
To make matters worse, Tesla is losing its dominance in the EV sector as competition is appearing out of nowhere. After starting a price war last year in which Tesla cut the price of its electric models on more than half a dozen occasions, its operating margin has, unsurprisingly, plummeted. The surprise is that these price cuts have not stopped the company’s global EV inventory from increasing.
Last but not least, an increasing percentage of the company's pre-tax income can be attributed to regulatory tax credits sold to other automakers and interest income on its cash position. These are unsustainable sources of income and not what one would expect from a market leader.
Suffice it to say, I don't think Tesla is the “next Nvidia.”
Mobileye Global: Implied Upside Potential of 216%
The other AI stock with tantalizing upside potential that could make Nvidia headlines yesterday is the advanced driver assistance systems (ADAS) and autonomous driving technologies company. Mobileye Global (NASDAQ: MBLY)Are you already noticing the trend of next-generation electric vehicles?
Chris McNally, global mobility and automotive analyst at Evercore ISI, believes Mobileye stock can rise to $35 per share. While this is below its all-time closing high, it would represent a staggering 216% increase from the stock’s current trading price at the time of writing.
The optimism surrounding Mobileye has to do with the continued addition of technology and driver safety features with each new generation of vehicles, especially electric vehicles. The company’s EyeQ chip line is being used to power SuperVision, an end-to-end ADAS system enabled by 11 cameras and autonomous vehicle maps that learn over time.
While there is a lot of excitement about the technology, the EV industry faces challenges that often plague innovations in their early stages. A lack of available EV infrastructure, among other factors, has weakened global EV sales in recent quarters and led to lower demand for Mobileye’s solutions.
Mobileye Global also pointed to a key customer outside of China delaying the launch of its ADAS system, as well as new tariffs in Europe and the United States, as additional reasons it had to moderate its sales forecasts of late. The company’s full-year sales forecast of $1.64 billion at the midpoint is well below the $1.96 billion peak that had been expected in 2024.
If there is one silver lining for Mobileye Global, it is that the company ended the second quarter with $1.2 billion in cash and cash equivalents and no debt on its balance sheet. Even with irregular short-term orders, Mobileye has exceptional financial flexibility.
While it may take some time for demand for ADAS technology to mature, Mobileye’s solutions appear well positioned for future success.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia and Tesla. The Motley Fool recommends Mobileye Global. The Motley Fool has a Disclosure Policy.
Nvidia is yesterday's news: These two artificial intelligence (AI) stocks are poised to soar by up to 1,050%, according to some Wall Street experts Originally published by The Motley Fool
