2 ‘Magnificent Seven’ Stocks That Could Drop Up to 98%, According to Select Wall Street Experts

In case you haven’t noticed, the bulls are in complete control on Wall Street. Mature, stock-oriented Dow Jones Industrial Averagelandmark S&P 500 Indexand stimulated by growth Nasdaq Compositesoared to several record highs in 2024.

While broader themes such as the artificial intelligence (AI) revolution, stock split euphoria and better-than-expected corporate earnings contributed to this rally, the foundation for this two-year (and ongoing) bull market was laid by the Magnificent Seven.

The Magnificent Seven represents some of Wall Street’s largest and most powerful public companies, including:

These are enterprises that, for the most part, have impassable ditches. For example, Alphabet’s Google has accounted for at least 90% of monthly global search share for more than nine years. Meanwhile, Apple’s iPhone leads in domestic smartphone market share, Amazon Web Services is the world’s leading cloud infrastructure services platform, and Meta Platforms attracts more daily active users to its sites than any other social media company.

Image source: Getty Images.

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

Nvidia: estimated minus up to 98%.

The first component of the Magnificent Seven that at least one respected Wall Street expert believes is losing most of its value is AI king Nvidia.

In an interview with Fox News Digital In May, economist and finance writer Harry Dent pointed out that Wall Street was in a “bubble of all bubbles,” which he expected would result in the market bottoming out in 2025. “I think we will see the S&P 86 fall.” % from the top, and the Nasdaq is at 92%. A hero stock like Nvidia, as good as it is, and it’s a great company, is (down) 98%. That’s it, Dent said.

While Dent’s forecast of a 98% decline completely overlooks Nvidia’s cash flow and the successful operating segments it had long before artificial intelligence became a driving force on Wall Street – such as graphics processing units (GPUs) for gaming and cryptocurrency mining, as well as virtualization software. I believe he recognizes the potential bubble that Nvidia stock could be in.

A perfect example is that in the last 30 years we have not seen the next big technology, innovation or trend escape the bursting of a bubble early in its expansion. Including the advent of the Internet, investors have for decades consistently overestimated the spread and mass adoption of supposedly game-changing innovations. So far, there is nothing to indicate that artificial intelligence will be an exception to this unwritten rule.

In addition to history being a challenge, Nvidia will face a significant increase in competition on all fronts. Although most investors are focused on external competition such as Advanced microdevices When bringing AI-GPUs to market, the real threat may come from within.

Mag-7 members Microsoft, Meta Platforms, Amazon and Alphabet are Nvidia’s four largest customers by net sales. All four industry leaders are independently developing AI-GPUs for use in their data centers. Even if Nvidia’s chips remain superior in terms of computing, the cost and availability advantages of these homegrown chips will ultimately cost Nvidia valuable data center real estate.

It would also be wise not to overlook the role US regulators have played in limiting Nvidia’s potential. In 2022 and 2023, regulators restricted Nvidia’s ability to export its AI GPUs to China, the world’s second-largest economy by gross domestic product. This is a big problem considering China consistently provides billions of dollars in annual sales to Nvidia.

While I don’t foresee Nvidia coming anywhere close to Harry Dent’s forecast of a 98% peak-to-trough decline, I do believe that AI is expected to mature as a technology, leading to significant Nvidia shares fall.

Image source: Tesla.

Tesla: estimated loss up to 90%

Another component of the Magnificent Seven that could collapse, according to a lone Wall Street analyst, is the electric vehicle (EV) maker. Tesla (NASDAQ:TSLA).

Tesla shares rose last week after reporting third-quarter operating results. In particular, optimists focused on gross profit growth, decisive year-over-year growth in the company’s energy segment and free cash flow (FCF) more than tripling to $2.74 billion. Despite this and previous operating reports, the founder of GLJ Research and longtime leader of Tesla Gordon Johnson has a very specific price target of $24.86 per share, implying a potential downside of 90%.

In a series of previous interviews with CNBC, Johnson has focused on Tesla’s recent earnings decline, questioned the safety of its vehicles and warned of growing competition in the electric vehicle space, as Tesla shares could fall to the mid-$20s. With. While I, once again, do not believe this extreme reduction target will be achieved, there is ample reason to believe that Tesla could lose half or more of its value in the coming quarters/years.

Increasing competition in a highly cyclical industry is an obvious challenge. CEO Elon Musk has previously noted that his company’s pricing strategy is driven by demand. However, even though Tesla has reduced the selling price of Model 3, S, X and Y more than half a dozen times since the start of 2023, the company’s inventory levels continue to rise compared to last year. This suggests that Tesla has a clear demand problem.

Another problem for Tesla is the quality of its earnings. Year-to-date, 51.3% of its pre-tax income comes from auto regulator loans and interest income on its cash. These are two categories of unsustainable income that have nothing to do with the essence of the business.

Adding fuel to the fire, Tesla’s $2.74 billion in free cash flow increased due to perfectly legal, if easily detectable, accounting tactics. The marked increase in accounts payable and accrued liabilities largely explains the recent increase in free cash flow. This means that Tesla’s electric vehicle business is not leading to improved operating results.

While Elon Musk played a large role in Tesla’s rise, he may be just as to blame for the significant decline in his company’s stock. The vast majority of Musk’s promises have not come true. The problem is that many of these innovations/promises are built into Tesla’s valuation. If these failed ideas (like Musk promising full Level 5 self-driving every year for ten years) are not factored into the company’s valuation, much of its market capitalization will evaporate.

Tesla’s valuation is the icing on the cake for pessimists. While some investors prefer to think of Tesla as a “tech stock,” its auto business is extremely important to its success, sales and profits. Automotive stocks typically trade at single-digit price-to-earnings (P/E) ratios, rather than higher than 80 times one-year forward earnings like Tesla.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, chief executive of Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams holds positions at Alphabet, Amazon and Meta Platforms. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has a disclosure policy.