AI stocks took another beating Monday as investors fled tech names over valuation concerns, with Nvidia dropping nearly 2% ahead of Wednesday's crucial earnings report. But some Wall Street analysts are betting on a year-end rally despite the recent turbulence, setting up a potential showdown between AI skeptics and bulls as 2025 winds down.
The AI revolution hit a speed bump Monday as investors dumped technology stocks, sending the Nasdaq down 0.84% and putting artificial intelligence leaders squarely in the crosshairs. Nvidia, the undisputed king of AI chips, led the decline with a nearly 2% drop, while tech titans Apple, Meta, and Oracle each shed more than 1%.
But this isn't just another routine tech selloff. Wednesday's Nvidia earnings report has become a make-or-break moment for the entire AI ecosystem, with CEO Jensen Huang's bold October prediction of "half a trillion dollars" in business for 2025 and 2026 now hanging over the company like a sword of Damocles.
"If they offer any even slightly muted guidance or forecast for demand for their chips, the market would take that poorly," Ross Mayfield, investment strategist at Baird, told CNBC. That $500 billion figure isn't just a number - it's become the benchmark by which investors will judge whether the AI boom is sustainable or headed for a reality check.
The pressure on Nvidia reflects broader anxiety about AI valuations and capital expenditure returns. After months of frenzied investment in AI infrastructure, from data centers to specialized chips, investors are starting to ask harder questions about when all this spending will translate into actual profits. The recent selloff suggests some are getting cold feet.
Yet even as AI stocks stumble, Wall Street strategists are split on what comes next. Michael Graham at Canaccord Genuity wrote in a Monday note that despite seeing "a balance of bullish and bearish signals heading into year-end," his firm's stance "remains that a year-end rally is likely." It's a bold call given the current market mood.
HSBC's chief multi-asset strategist Max Kettner went even further, telling clients Monday that the bank thinks "the probability of a melt-up into year-end - particularly in equities - is much greater" than a potential AI bubble popping. That's essentially betting that fear of missing out will overcome current valuation concerns as December approaches.
