Beginning in the mid-1990s, the Internet completely changed the way consumers and businesses interacted. While it took time for this innovative technology to become mainstream and mature, the Internet ultimately changed the growth trajectory for Corporate America in a positive way.
For thirty years, Wall Street and investors have been anxiously awaiting the next leap forward in technology that would do for businesses what the Internet did in the mid-1990s. After much anticipation, artificial intelligence (AI) appears to be the answer.
The huge addressable market for AI comes from the ability of software and systems to learn without human intervention. This machine learning capability can help AI systems become more efficient at their tasks, or potentially learn entirely new skills, over time.
The game-changing potential of AI isn’t lost on Wall Street institutions, analysts or asset managers. Most experts expect this revolutionary technology to make investors richer — but some price targets are bigger than others.
Based on the predictions of three Wall Street experts, the following three high-profile AI stock holders offer upside potential of as much as 1,200%!
Nvidia: Implied Upside of 91%
The first artificial intelligence stock that at least one Wall Street expert thinks will rise is the data center hardware leader Nvidia (NASDAQ: NVDA).
Despite Nvidia adding more than $2.2 trillion to its market cap since the start of 2023, Rosenblatt Securities analyst Hans Mosesmann believes it could effectively become Wall Street’s first $5 trillion company. His Street-high $200 price target, issued after Nvidia’s historic 10-for-1 forward split, suggests 91% upside based on the $104.75 share price the company closed at on August 9.
Like most Nvidia optimists, Mosesmann believes it will maintain its dominance of AI graphics processing units (GPUs) used in high-compute data centers. Because demand for the company’s chips far outstrips supply, it has had little trouble raising the selling price of its GPUs and expanding its adjusted gross margin.
But Mosesmann is equally excited about Nvidia’s CUDA platform, the toolkit developers use to build large language models. According to Mosesmann, Nvidia’s software will go hand in hand with its AI GPUs to keep customers in its ecosystem.
History, however, is working against Mosesmann’s prediction. In 30 years, we haven’t seen a next-big-thing innovation that avoided an early bubble. Since most companies don’t have a clear plan for AI, it’s pretty clear that this technology is still in the early stages of maturing. In short, there’s a good chance that an AI bubble will burst sooner rather than later.
Nvidia’s historic run also requires flawless execution, which simply isn’t sustainable. Less than two weeks ago, it was reported that shipments of the company’s next-generation GPU platform, known as Blackwell, would be delayed by at least three months due to design flaws. Even with that chip currently sold out well into 2025, a delay opens the door for external and internal competitors to seize valuable data center “real estate.”
We’ve probably already seen the peak of Nvidia’s stock price.
Super Micro Computer: Implied Upside of 195%
A second leading AI stock that could skyrocket, according to a Wall Street analyst’s forecast, is the customizable rack server and storage specialist Supermicrocomputer (NASDAQ: SMCI).
Less than a month after Super Micro was added to the benchmark S&P 500Loop Capital’s Ananda Baruah gave the company a lofty price target of $1,500. With Super Micro’s shares now down to “just” $508 and change, Baruah’s price target suggests a near-tripling could follow.
Baruah believes the company is well-positioned within the AI sector to capitalize on growing enterprise demand for high-performance data centers capable of running generative AI solutions and training large language models.
Moreover, the addition to the S&P 500 should allow for a multiple expansion that eventually pushes the stock price to $1,500 — or $150 on a split-adjusted basis. On Aug. 6, Super Micro became the latest high-profile company to announce a stock split.
While there’s no denying that triple-digit year-over-year revenue growth for a long-established infrastructure company is impressive, there are reasons for investors to be cautious. For example, Super Micro Computer is integrating Nvidia’s ultra-popular H100 GPUs into its rack-mountable servers. The problem for Super Micro is that Nvidia can’t meet all of its demand, which means it’s at the mercy of its suppliers.
There’s also a bit of a precedent for expectations getting ahead of reality for Super Micro Computer. The company’s stock skyrocketed in the mid-2010s on expectations that it would become a major infrastructure player in the enterprise cloud boom. Unfortunately, Wall Street and investor expectations weren’t met.
While Super Micro Computer may still spring a surprise in the short term, I think it is highly unlikely that Baruah will reach his target amount of $1,500.
Tesla: Implied Upside of 1,200%
The crème de la crème of upside price targets for AI stocks, however, comes from Cathie Wood, CEO and Chief Investment Officer of Ark Invest.
In June, Ark’s Monte Carlo analysis announced a (drumroll) $2,600 price target for the electric vehicle (EV) maker Tesla (NASDAQ: TSLA) by 2029. This implies a market capitalization of approximately $8.3 trillion, which is more than double the value of the largest listed company in the world today.
Wood and her team arrived at the lofty price target by focusing on Tesla’s AI-powered robotaxi business. Wood expects Tesla to generate $1.2 trillion in annual sales over five years, with 63% of revenue and 86% of the $440 billion in expected earnings before interest, taxes, depreciation, and amortization (EBITDA) coming from robotaxis.
Unfortunately, there’s one major flaw in Ark Invest’s Monte Carlo model. Tesla doesn’t have a single robotaxi on public roads, despite CEO Elon Musk’s April 2019 claims that his company would have “over a million robotaxis on the road” by the following year. Tesla has failed to advance beyond Level 2 autonomy, making it nearly impossible for the company to achieve even a fraction of what Wood’s Monte Carlo analysis predicted.
Perhaps the bigger problem here is that Tesla’s valuation has been inflated by broken promises from Musk. In addition to failing to deliver on “over a million robotaxis,” Musk has suggested that Tesla’s EV is “one year away” from full autonomy every year for a decade. If this laundry list of unfulfilled promises and hype (e.g. Optimus) were removed from Tesla’s valuation, shares could easily lose three-quarters of their value, if not more.
To make matters worse, competition has meaningfully increased for the company’s EV business, the operating segment that historically generated the majority of its cash flow and operating income. The price war Tesla launched in 2023 to boost demand for its EVs has eroded its operating margin and failed to stop the rise in global EV inventory.
Last but not least, Tesla’s pre-tax income has become increasingly dependent on unsustainable sources. Nearly 66% of the company’s pre-tax income in the quarter ended June came from statutory tax credits sold to other automakers and interest income on its cash on hand.
It goes without saying that nothing justifies Tesla’s current $200 price tag, let alone Wood’s ambition to invest $2,600.
Should You Invest $1,000 in Nvidia Now?
Before you buy Nvidia stock, here are some things to consider:
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.
3 Artificial Intelligence (AI) Stocks That Could Soar Up to 1,200%, According to Select Wall Street Experts was originally published by The Motley Fool
