Wall Street’s AI Stocks Set for Major Upside in 2024
The past two months have brought volatility to Wall Street, but the last couple of years were characterized by strong optimism. By 2024, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite managed to achieve multiple record-closing highs.
Several factors have contributed to this market surge, but none stands out quite like the emergence of artificial intelligence (AI).
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AI has transformed software and systems by equipping them with the ability to reason, act, and evolve independently. This capability allows for quick decision-making without human input, broadening its market impact. According to PwC in their report Sizing the Prize, AI could contribute up to $15.7 trillion to the global economy by 2030.
Image source: Getty Images.
Wall Street analysts have certainly noticed AI’s vast market potential, and projections suggest an upside of as much as 232% for three key AI stocks.
Nvidia: Potential Upside of 117%
The first standout stock is Nvidia (NASDAQ: NVDA), which analysts believe could demonstrate significant growth. Despite recent price target cuts, Ivan Feinseth from Tigress Financial maintains a bullish price target at $220 per share, indicating a 117% upside based on its closing price on April 17. Should this target be reached, Nvidia would become the world’s largest publicly traded company.
Feinseth’s optimism is largely due to the demand for data center infrastructure. Nvidia’s Hopper (H100) graphics processing unit and upcoming Blackwell GPU architecture are preferred options for companies looking to implement generative AI solutions. The robust spending by businesses aiming to take the lead in their industries supports continued growth for Nvidia.
Moreover, Feinseth cited the company’s continuous innovation as a means of justifying its high valuation. The introduction of Blackwell, followed by Vera Rubin in 2026 and Vera Rubin Ultra in late 2027, underscores Nvidia’s commitment to maintaining a competitive edge.
Nevertheless, there are concerns that Feinseth’s aggressive price projection may not materialize. Historically, major technological innovations have faced bubble-busting events, and while AI has promising applications, many companies have yet to effectively harness their AI investments.
Furthermore, Nvidia’s primary growth driver—the scarcity of AI GPUs—is tapering. Several top customers are developing their own AI solutions, which, although not sold externally, occupy valuable data center space that Nvidia hoped to fill. As AI GPU scarcity diminishes, Nvidia could see reduced pricing power and lower gross margins.
Image source: Getty Images.
Super Micro Computer: Potential Upside of 122%
Another AI-related stock with promising upside is Super Micro Computer (NASDAQ: SMCI), according to a Wall Street analyst. Following a recent price target increase, Loop Capital’s Ananda Baruah projects shares of Supermicro could reach $70, representing a potential gain of 122% for existing shareholders as of April 17.
Baruah attributes his optimistic price target to Supermicro’s strategic positioning within the AI sector. To succeed, businesses must establish infrastructure to support AI-driven data centers. Supermicro’s utilization of Nvidia’s next-gen GB200 and GB300 chips for its AI stacks is a significant growth catalyst, especially with its top clients planning heavy infrastructure investments in 2025.
However, challenges lie ahead for Super Micro Computer. The company faced allegations of “accounting manipulation” last summer, resulting in delays for its fiscal 2024 annual report and first-quarter fiscal 2025 filings. Although an independent committee found no evidence of management wrongdoing, reputational damage remains a concern.
In addition, competition within the rack server market is escalating quickly. It remains uncertain if Supermicro possesses a unique edge that distinguishes it from other players in the AI infrastructure landscape.
SoundHound AI: Potential Upside of 232%
Lastly, SoundHound AI (NASDAQ: SOUN), a company specializing in AI voice recognition and conversational technology, presents a substantial upside potential according to an analyst. The projected price target suggests a high value of $26, indicating significant room for growth in the stock.
SoundHound AI Shares Poised for Major Growth Despite Challenges
Scott Buck from H.C. Wainwright forecasts that SoundHound AI’s stock price could surge by 232% within the coming year. Notably, shares of SoundHound AI nearly reached $25 each on December 26, but have since dropped below $8 in response to significant market volatility.
Buck’s optimism is based on his assessment that SoundHound AI has developed a platform that can scale rapidly. Instead of confining its AI voice recognition technologies to specific industries, Buck sees potential in integrating various ecosystems. For example, using voice recognition in vehicles to make orders or secure restaurant reservations through a virtual agent can open new revenue streams for SoundHound AI as these technologies come together.
Additionally, SoundHound AI signifies a new phase in the AI revolution. While we are still witnessing rapid infrastructure growth, the focus is shifting towards practical applications and agentic AI—essentially AI systems designed to assist humans and collaborate with other AI solutions.
However, much remains uncertain regarding the viability of such promising AI investments. SoundHound AI closed out 2024 with a 101% year-over-year increase in sales for the fourth quarter (Q4), yet it reported a significant adjustment loss of about $19 million, nearly double that of the previous year. The company is incurring heavy expenses in its pursuit of expansion and innovation, contributing to mounting losses.
At year-end, SoundHound AI reported $198 million in cash and cash equivalents, with no debt. However, it spent approximately $109 million on operating activities last year, a rise of over $40 million compared to the prior period. This situation raises concerns about whether SoundHound AI will need to further dilute its shares to secure additional capital.
Despite the remarkable sales growth, SoundHound AI has considerable challenges ahead to gain credibility with Wall Street and its investors.
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Sean Williams has no positions in any of the stocks mentioned. The Motley Fool recommends Nvidia and has positions in it. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
