Wall Street Embraces AI Stocks with High Growth Potential
For the past two-and-a-half years, optimism has prevailed on Wall Street. During this period, the venerable Dow Jones Industrial Average, the widely followed S&P 500, and the growth-focused Nasdaq Composite have all reached record-closing highs.
Numerous factors have contributed to this optimism, including robust corporate earnings and heightened anticipation surrounding Donald Trump’s potential return to the White House (the markets surged during his first term). However, nothing has had a more profound impact on the stock market than the advent of artificial intelligence (AI).
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The rise of AI technology, capable of reasoning and evolving without human input, signals a transformative potential across various industries. Analysts at PwC predict a remarkable 26% increase in global gross domestic product (GDP) by 2030 as a result of AI integration.
Wall Street analysts recognize the transformative potential of AI, with many expressing optimism. Notably, a few analysts are targeting three promising AI stocks that could see remarkable growth of 95% to 167% over the next year.
Nvidia: Predicting a 95% Upside
The first AI stock with significant growth potential is Nvidia (NASDAQ: NVDA). Analyst Hans Mosesmann from Rosenblatt currently projects a price target of $220 per share for Nvidia, suggesting an impressive 95% increase within the next 12 months.
Much of Mosesmann’s enthusiasm is rooted in Nvidia’s leading position as the preferred GPU supplier for AI-driven data centers. Demand for Nvidia’s Hopper (H100) chip and the successor Blackwell GPU architecture has soared, with Blackwell generating $11 billion in sales during the fiscal fourth quarter (ending January 26, 2025). This marks the swiftest adoption of a new product in Nvidia’s history.
Additionally, Mosesmann highlights the significance of CUDA, the toolkit that developers use to unlock the full capabilities of Nvidia’s GPUs. CUDA has fostered strong client loyalty within the Nvidia ecosystem.
However, Nvidia faces formidable challenges. Rising competition from external sources threatens its market position, and top customers are increasingly developing their own AI chips. While these might lack the power of Nvidia’s advanced products, they offer cheaper alternatives that could disrupt Nvidia’s current dominance.
Moreover, historical trends might pose risks for Nvidia. Artificial intelligence has historically experienced bubbles that lead to market corrections. While AI shows promise for long-term benefits, many companies have not yet optimized their AI investments, which raises concerns given that 88% of Nvidia’s sales last year stemmed from its data center segment.
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SoundHound AI: Forecasting a 167% Upside
Another promising AI stock is SoundHound AI (NASDAQ: SOUN). According to H.C. Wainwright analyst Scott Buck, SoundHound AI could rise to $26 per share, indicating a 167% increase from its closing price on March 7.
Buck’s optimism is founded on the expectation that SoundHound AI will successfully create an integrated AI voice ecosystem. The company is involved in various industries, but Buck believes the real value lies in connecting these sectors to form a cohesive system.
For example, integrating AI voice technology in next-gen vehicles could allow users to place orders at select restaurants. This strategy might generate revenue through flat fees, convenience fees, or a percentage of total sales.
Additionally, SoundHound AI is leading the charge for agentic AI, aiming to develop AI systems that function as assistants for consumers and businesses. The company reported 85% sales growth in 2024, and projections indicate that revenue could double this year, underscoring the success of its agentic AI initiatives.
However, SoundHound AI faces considerable hurdles on the profitability front. The company’s adjusted net loss nearly doubled in the fourth quarter and increased by 19% for the full year. Additionally, SoundHound AI has seen a notable decline in its gross margin.
The firm is heavily investing in its future growth, resulting in significant capital burn. Total net cash used for operating and investing activities surpassed $121 million last year, compared to less than $69 million in 2023. With $198 million in cash reserves as of December 31, further dilutive share offerings may be necessary for SoundHound AI to sustain operations.
Upstart Holdings: Anticipated 105% Upside
Lastly, the AI stock poised for notable growth is Upstart Holdings (NASDAQ: UPST). In February, Mizuho‘s Dan Dolev increased his price target for Upstart to $110…
Upstart’s AI-Driven Lending Model Offers Potential for Stock Surge
If Upstart’s projected high price target materializes, existing shareholders could see a significant 105% upside as of the market close on March 7.
Disrupting the Traditional Lending Process
Upstart has the potential to revolutionize the lending industry. Traditionally, the loan-vetting process takes days or weeks, creating inefficiencies and incurring high costs for lenders. In contrast, Upstart utilizes artificial intelligence (AI) and machine learning (ML) to rapidly assess most consumer loans, resulting in lower operational costs and improved satisfaction for both customers and banks. By the end of 2024, Upstart partnered with over 100 banks and credit unions, with a remarkable 91% of its loans fully automated.
The company’s platform not only accelerates the loan approval process but also continuously improves its ability to assess creditworthiness. Interestingly, the average credit score for loans approved through Upstart is below the average credit score used in traditional vetting methods. However, data indicates that delinquency rates for loans processed through both methods are comparable. This suggests that Upstart can widen the pool of eligible borrowers for banks without escalating credit risks.
Challenges Ahead for Upstart’s Business Model
Despite its innovations, Upstart faces concerns regarding the durability of its lending model in the face of an economic downturn. The company’s stock took a hit soon after the COVID-19 pandemic emerged, which raises questions about how well its platform would perform during a standard recession, typically lasting about 10 months since World War II.
Furthermore, Upstart’s revenue is closely tied to fluctuations in monetary policy and interest rates. Should inflation pressure the Federal Reserve to increase rates, it could negatively impact demand for personal loans, which represent a significant part of Upstart’s business.
As a result, it may not be surprising to see Upstart’s stock remain highly volatile throughout 2025.
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Sean Williams holds no positions in the mentioned stocks. The Motley Fool has positions in and recommends both Nvidia and Upstart. For further details, please refer to the Motley Fool’s disclosure policy.
The views and opinions expressed herein represent those of the author and do not necessarily reflect those of Nasdaq, Inc.
