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Nasdaq Correction: 2 AI Stocks Down 33% and 86% to Buy Before They Soar, According to Wall Street

Nasdaq Correction: 2 AI Stocks Down 33% and 86% to Buy Before They Soar, According to Wall Street

  • 25.03.2025 08:16
  • theglobeandmail.com
  • Keywords: AI, Stock Market

Nasdaq stocks Arm Holdings and Upstart Holdings have dropped 33% and 86% respectively but show potential upside of 42% and 57%. Despite Arm's guidance narrowing and Upstart facing inflation challenges, Wall Street sees opportunities in their AI-driven growth.

Alphabet ReportsARMsentiment_satisfiedUPSTsentiment_satisfiedINTCsentiment_dissatisfiedCPTsentiment_dissatisfiedAAPLsentiment_satisfiedAMZNsentiment_satisfiedMSFTsentiment_satisfiedGOOGLsentiment_satisfied

Estimated market influence

Nasdaq Composite

Negativesentiment_dissatisfied
Analyst rating: N/A

The Nasdaq Composite has dropped over 10% in March, but Wall Street sees buying opportunities for AI stocks like Arm Holdings and Upstart Holdings.

Arm Holdings

Arm Holdings

Positivesentiment_satisfied
Analyst rating: Buy

Despite a 33% drop from its 2024 high, Arm has strong revenue growth driven by AI demand. The median target price suggests a 42% upside potential.

Upstart Holdings

Upstart Holdings

Positivesentiment_satisfied
Analyst rating: N/A

Down 86% from its 2021 high, Upstart's AI-driven lending platform shows strong growth with revenue up 56%. The median target price indicates a 57% upside potential.

Intel

Intel

Negativesentiment_dissatisfied
Analyst rating: Neutral

Intel is mentioned as a competitor to Arm in the CPU market, highlighting the threat posed by Arm's increasing market share.

AMD

AMD

Negativesentiment_dissatisfied
Analyst rating: Buy

Like Intel, AMD faces competition from Arm in the CPU market, which could impact their market position.

Apple

Apple

Positivesentiment_satisfied
Analyst rating: Buy

Apple's transition to Arm chips in MacBooks underscores Arm's growing influence and adoption in key markets.

Amazon

Amazon

Positivesentiment_satisfied
Analyst rating: Strong buy

Amazon, along with Microsoft and Alphabet, uses Arm-based processors, indicating a shift towards more efficient computing solutions.

Microsoft

Microsoft

Positivesentiment_satisfied
Analyst rating: Strong buy

Microsoft's use of Arm-based processors highlights the growing adoption of Arm technology in major cloud providers.

Alphabet

Alphabet

Positivesentiment_satisfied
Analyst rating: Buy

Alphabet, like Amazon and Microsoft, is adopting Arm-based processors, reflecting a trend towards more efficient computing solutions.

Context

Analysis of Nasdaq Correction: 2 AI Stocks Down 33% and 86%

Arm Holdings (NASDAQ: ARM)

  • Stock Performance: ARM shares are down 33% from their 2024 high due to disappointing guidance, despite strong Q3 2025 performance.
  • Analyst Sentiment: Median target price of $177.50 implies 42% upside from current share price (~$125).
  • Market Position:
    • Dominates mobile devices with ~99% smartphone market share and ~67% in other mobile devices.
    • Gaining traction in PCs and data centers, with major clients like Apple, Amazon, Microsoft, and Alphabet.
  • Revenue Growth: Q3 2025 revenue increased by 19% to $983 million, driven by AI demand for energy-efficient computing.
  • Valuation Concerns: Current valuation (~85x) appears expensive given projected 31% annual earnings growth through FY 2026.

Upstart Holdings (NASDAQ: UPST)

  • Stock Performance: UPST shares are down 86% from their 2021 high due to high inflation and interest rates.
  • Analyst Sentiment: Median target price of $86.50 implies 57% upside from current share price (~$55).
  • Business Model:
    • Uses AI for lending decisions, considering thousands of variables vs traditional systems.
    • Serves over 100 banks and credit unions with personal loans, automotive loans, and refinancing.
  • Performance: Q4 revenue up 56% to $219 million, with non-GAAP net income improving to $0.29 per share.
  • Market Opportunity:
    • TAM exceeds $2 trillion in loan originations.
    • 2024 transaction volume was <$6 billion, indicating significant growth potential.
  • Valuation and Risks:
    • Trades at ~7.8x forward sales, below historical average of 9x.
    • Sensitive to inflation and interest rates, which have driven past declines.

Market Implications

  • Both companies offer significant upside potential according to analysts, but face execution risks and external challenges (e.g., economic conditions).
  • ARM's dominance in mobile devices and growing presence in PCs/data centers positions it for long-term growth, despite near-term valuation concerns.
  • UPST's AI-driven lending platform has strong growth prospects, but its sensitivity to macroeconomic factors poses significant risk.

Strategic Considerations

  • Investors should consider small allocations with a multi-year time horizon given the companies' potential and current undervaluation.
  • ARM's competitive advantage in chip design and Upstart's AI-driven lending technology position them as key players in their respective industries.