With the tech-heavy Nasdaq Composite down over 8% this year, investors are starting to look for opportunities. Some of the most popular stocks like those in the "Magnificent Seven" haven't been on sale for more than two years, and perhaps their valuations are now more favorable.
Few stocks have been more popular than the artificial intelligence chip king Nvidia (NVDA +1.68%) and the electric carmaker Tesla (TSLA +2.96%), which are down 13% and 38%, respectively, this year. Per usual, Wall Street analysts are on top of these names and have been updating their views and price targets since both stocks have declined. Certain analysts say to buy one of them and sell the other. Let's take a look.
Tesla has become a battleground stock
Shares of Tesla absolutely flew following President Donald Trump's election victory in early November, for no obvious reason other than CEO Elon Musk's close ties to the president and an easier regulatory environment. However, this year the stock has been hit hard by the broader market sell-off as well as concerns about Tesla deliveries in the first quarter.
Tesla quickly turned into a battleground stock, as investors grapple with upcoming catalysts related to the company's robotaxi and robot initiatives versus its expensive valuation. Tesla trades at about 86 times forward earnings and analysts on average expect to see earnings grow by 17%, according to data provided by Visible Alpha. Wall Street analysts are split on whether or not to buy the stock. Of the 36 analysts who have issued a research report, 12 say to buy the stock, 13 say hold, and 11 say sell. The average price target implies 41% upside.
NASDAQ: TSLA
Key Data Points
JMorgan Chase analyst Ryan Brinkman is the low on the Street and has concerns about Musk's involvement in government affairs and working alongside Trump. "Mr. Musk's work with the Department of Government Efficiency has proven controversial domestically, and while as many members of the political right may be pleased as those on the left are displeased, the effect on Tesla sales seems nevertheless negative," he wrote in a research note on March 12.
Investors will be razor-focused on Tesla's first-quarter earnings to see how the numbers shake out. The stock could move dramatically one way or the other but stocks that trade at such high valuations could be vulnerable on a big miss or weak guidance.
Analysts say Nvidia is an overarching buy
While investors are torn on Tesla, they are near unanimous on rating Nvidia a buy. Of the 42 analysts who have issued research reports on the company over the last three months, 39 assign the stock a buy rating, while three say hold. The average price target implies nearly 50% upside.
The emergence of DeepSeek earlier this year, a Chinese start-up that allegedly managed to create a similar chatbot as ChatGPT at a far lower cost and with older Nvidia chips, sent the stock and the broader AI sector for a loop. Investors wondered whether the industry would need the same chip technology and computing power as initially believed. Furthermore, Nvidia is potentially dealing with more strict export restrictions on its chips, as both former President Joe Biden's administration and the Trump administration have sought to prevent China from gaining certain artificial intelligence capabilities.
NASDAQ: NVDA
Key Data Points
However, Nvidia CEO Jensen Huang continues to brush off threats from DeepSeek, suggesting that the technological innovation will mean more demand for Nvidia's products and not less because the more data AI has the smarter the algorithms become. At a recent conference, Huang said that spending on data centers could reach $1 trillion. Analysts seemed to have liked what they heard. " ... Nvidia is continuing to deepen its competitive moat in a $1 trillion-plus infrastructure/services total addressable market," Bank of America analyst Vivek Arya said in a research note following the conference.
Nvidia now trades at 26 times forward earnings, down from peaks of over 50 in recent months. Analysts on average expect the company to grow earnings by about 48% in its fiscal year 2026. While I'm not the biggest buyer of AI stocks, this setup looks a lot more favorable than in the past.
