The market is coming off two superb years, 2023 and 2024, when the S&P 500 climbed over 53% in total, mainly thanks to tech and artificial intelligence (AI) stocks. While 2025 has started off with some turbulence, many strategists still think the market will once again move higher this year and that the tech and AI rally still has legs.
Larger AI stocks, like those in the "Magnificent Seven," carried the market in 2025, but there are many compelling and smaller AI names with bright futures. Two in the electric vehicle (EV) space are electric aircraft company Archer Aviation (ACHR +2.27%) and Chinese EV company Nio (NIO 7.51%). Both stocks have been quite volatile, so investors may want to start small. However, both companies could generate outstanding returns over time:
- Deutsche Bank analyst Edison Yu raised his price target on Archer Aviation from $12 to $15 in December and reiterated his buy rating on the stock. This implies 61% upside from current levels (as of Jan. 10). Meanwhile, the average price target of analysts over the last three months is $11.38, according to TipRanks.
- Citigroup analyst Jeff Chung raised his price target on Nio from $7 to $8.90 at the end of September, which suggests 113% upside from current levels (as of Jan. 10). Meanwhile, the average analyst price target over the last three months is $5.72, according to TipRanks.
1. Archer Aviation: Easing traffic via air taxis
Archer Aviation built an electric aircraft air taxi. The vehicle is designed to perform quick consecutive flights of 20 to 50 miles, carrying a pilot and four other passengers. The vehicle requires minimal charge time and can supposedly fly as fast as 150 miles per hour, reducing traffic-congested trips from hours to minutes. The company is working to set up networks in Los Angeles and San Francisco and with international airports in Chicago and Newark.
Archer has also made significant regulatory progress toward achieving final certification from the Federal Aviation Administration (FAA). For its Midnight vehicle, the company has obtained final airworthiness, FAA Part 135 certification necessary to operate commercial flights, and conducted over 400 test flights ahead of schedule. The FAA also signed off on a final operational rule, providing a framework for regulators to oversee commercial air taxis.
NYSE: ACHR
Key Data Points
In December, Archer announced a partnership with Anduril Industries to develop an electric aircraft for defense purposes. The two companies first plan to team up on a hybrid-propulsion aircraft potentially for the U.S. Department of Defense. This announcement led Yu to raise his price target to $15. He thinks this could be a multibillion-dollar program generating revenue sooner because military contracts could be granted this year.
Archer has a lot going for it, and it looks like a massive opportunity. However, the company is still essentially a pre-revenue start-up, so investors may want to start small and build their position over time.
2. Nio: Tapping into the Chinese EV market
Nio has operated since 2014 and manufactures and sells EVs in China. The company also leverages AI to provide a captivating experience. In the company's digital cockpit, there's an AI companion that can listen to and interact with users to provide a more customized driving experience. Nio is also developing the capabilities and network for users to swap electric vehicle batteries when they run out of power, which is quicker than finding a charging station and waiting for a vehicle's battery to charge.
The company recently reported record monthly and quarterly deliveries of 73,689 in the fourth quarter of 2024. However, the stock has struggled over the past year. Nio has been dealing with challenges in the EV sector, such as costs and competition, and struggles with China's economy, which has been dealing with deflationary concerns and a housing crisis.
NYSE: NIO
Key Data Points
Chung has grown bullish, however, due to the launch of Nio's more affordable Firefly brand, a smaller boutique car with prices starting around $20,000. The car is expected to compete with similar vehicles created by Mercedes and BMW. While EVs seem to have a bright future and China's economy presents a massive opportunity, Nio also faces near-term challenges, another reason investors may want to start with a smaller, more speculative position.
