Two ‘Magnificent Seven’ stocks that could plummet by up to 98%, according to Wall Street experts

In case you haven’t noticed, the bulls have a lot of control on Wall Street. The mature stock-driven Dow Jones Industrial Average, the benchmark S&P 500, and the growth-promoting Nasdaq Composite Index all rose to multiple record closing highs in 2024.

While broader themes such as the artificial intelligence (AI) revolution, stock split euphoria, and better-than-expected corporate earnings have fueled this rally, the foundation of the bull market of the past two years (and beyond) has been the U.S. built by the government. “Magnificent Seven”.

The Magnificent Seven represents some of Wall Street’s largest and most influential publicly traded companies, including:

apple (AAPL 1.09%)
Nvidia (NVDA -0.24%)
microsoft (MSFT -0.17%)
alphabet (Google 1.03%) (GOOG 0.99%)
Amazon (AMZN 0.74%)
meta platform (meta 1.08%)
tesla (TSLA -0.70%)

These businesses almost always have impenetrable moats. For example, Alphabet’s Google has commanded at least 90% of the world’s monthly search share for more than nine years. Meanwhile, Apple’s iPhone is the domestic smartphone market share leader, Amazon Web Services is the world’s top cloud infrastructure services platform, and Meta Platforms has more daily active users on its site than any other social media company. I am attracted to.

Image source: Getty Images.

Despite these competitive advantages, there are mixed views on Wall Street about where some of the members of the Magnificent Seven will go next. Based on price targets from two Wall Street experts, the following Magnificent Seven stocks could fall by up to 98%.

Nvidia: Up to 98% potential downside

The first of the “Magnificent Seven” stocks that at least one prominent Wall Street commentator considers to have lost most of its value is AI kingpin Nvidia.

Economist Harry Dent, in an interview with Fox News Digital in May, noted that Wall Street is in “the bubble of all bubbles,” resulting in the market bottoming out in 2025. I expected it to be. When you see the S&P down 86% from its highs and the Nasdaq down 92%, hero stocks like Nvidia are great companies, but 98% down is over. ” Per Dent.

Dent’s forecast of a 98% decline is a sharp decline in Nvidia’s cash flow and business segments that it successfully deployed long before AI became a powerhouse on Wall Street, such as graphics processing units for gaming and crypto mining ( (GPU) is completely overlooked. Virtualization Software — I believe he recognizes that Nvidia stock is in a potential bubble.

As a perfect example, we haven’t seen the next big technology, innovation, or trend avoid an early expansion bubble burst for at least 30 years. For decades, including the advent of the Internet, investors have consistently overestimated the spread and mainstream adoption of supposedly game-changing innovations. So far, there is nothing to suggest that artificial intelligence will be an exception to this unwritten rule.

Beyond historical issues, NVIDIA will face a significant increase in competition on all fronts. While most investors are focused on external competition, such as Advanced Micro Devices bringing its AI-GPU to market, the real threat could come from within.

Mag-7 members Microsoft, Meta Platforms, Amazon, and Alphabet are Nvidia’s fourth largest customer by net revenue. All four of these respective industry leaders are developing AI-GPUs in-house for use in their data centers. Even if Nvidia’s chips are still superior in terms of computing, the cost and access advantages of these internally developed chips should ultimately force Nvidia to take away valuable data center real estate.

It would also be wise not to overlook the role that US regulators have played in limiting NVIDIA’s potential. Regulators have restricted NVIDIA’s ability to export AI-GPUs to China, the world’s second-largest economy by gross domestic product (GDP), in 2022 and 2023. This is a big problem considering that China continues to provide Nvidia with billions of dollars in annual revenue.

While I don’t expect NVIDIA to come close to Harry Dent’s prediction of a 98% peak-to-trough decline, I think AI needs to mature as a technology, and that’s why NVIDIA stock will… I think it will lead to a significant decline.

Image source: Tesla.

Tesla: up to 90% downside potential

Another potential collapse of the Magnificent Seven is electric vehicle (EV) maker Tesla, based on predictions from a lone Wall Street analyst. (TSLA -0.70%).

Last week, Tesla’s stock price soared following the release of its third-quarter operating results. Specifically, optimists note higher gross margins, decisive year-over-year growth in the company’s energy division, and free cash flow (FCF) more than tripled year-over-year to $2.74 billion. are. Despite this and previous reports, GLJ Research founder and longtime Tesla Bear supporter Gordon Johnson has a very specific price target of $24.86 per share, which is 90. It means the lower value of %.

In a number of previous interviews with CNBC, Johnson has focused on Tesla’s recent profit decline and questioned the safety of its vehicles as a reason to believe Tesla stock could head toward the mid-$20s. has warned of intensifying competition in the EV field. s. Again, I do not believe that this extreme downside target will be achieved, but I do believe that Tesla could lose more than half of its value in the coming quarters or years. There’s a good reason.

Increasing competition in a highly cyclical industry is a clear concern. CEO Elon Musk has previously said the company’s pricing strategy will be driven by demand. But even though Tesla has cut the selling prices of its Model 3, S, X, and Y more than six times since early 2023, the company’s inventory levels continue to rise year over year. This suggests that Tesla has a clear demand problem.

Another problem for Tesla is the quality of its revenue. On a year-to-date basis, 51.3% of pre-tax revenue comes from motor vehicle regulatory credits and cash interest income. These two unsustainable income categories have nothing to do with the core of your business.

Adding fuel to the fire, Tesla’s FCF hit $2.74 billion. This was due to some perfectly legal accounting tactics, albeit easily spotted. A significant portion of this recent increase in FCF is explained by a significant increase in accounts payable and outstanding liabilities. This means that Tesla’s EV business is not producing the results that would be expected to improve its business performance.

Elon Musk has played a big role in Tesla’s rise, but he may be just as responsible for causing the company’s stock price to plummet. The overwhelming majority of Mr. Musk’s promises have not materialized. The problem is that many of these innovations/promises are baked into Tesla’s valuation. If these failed visions (for example, Musk has promised Level 5 fully autonomous driving every year for a decade) are removed from the company’s valuation, much of its market capitalization will evaporate.

Tesla’s valuation is a highlight for pessimists. Although some investors like to think of Tesla as a “tech stock,” the auto business is by far the most important to Tesla’s success, sales, and profits. Auto stocks typically trade at single-digit price-to-earnings ratios, and unlike Tesla, they don’t trade above 80 times prior-year earnings.