2 Popular AI Stocks to Sell Before They Drop 24% and 66% in 2025, According to Certain Wall Street Analysts

In the rapidly evolving world of artificial intelligence (AI), investors have been drawn to the potential of AI stocks. However, not all AI stocks are created equal, and some may be overvalued or face significant challenges ahead. Two popular AI stocks that have caught the attention of Wall Street analysts are Apple (AAPL) and Tesla (TSLA). According to certain analysts, these stocks could drop by 24% and 66% in 2025, respectively. Let's take a closer look at the factors contributing to these potential declines and the current valuations of these stocks.

Apple (AAPL)

Apple's stock has advanced 34% during the past year, driven primarily by valuation multiple expansion rather than earnings growth. Some Wall Street analysts, like Tim Long at Barclays, have turned bearish on the stock, initiating coverage with a sell rating and a target of $184 per share, implying 24% downside from the current share price of $243.

One of the primary catalysts for the potential downside in Apple shares is the lack of an iPhone upgrade cycle. Despite the introduction of Apple Intelligence, a suite of AI features, there has been no significant iPhone upgrade cycle. Craig Moffett at MoffettNathanson noted that consumers seem unmoved by AI functionality, which contradicts the initial expectations of an upgrade cycle.

Additionally, Apple's current valuation of 35.9 times adjusted earnings is considered unsustainably expensive, given that Wall Street expects adjusted earnings to increase by only 9% in fiscal 2025. This high valuation leaves the stock vulnerable to a correction if earnings growth fails to meet expectations.



Tesla (TSLA)

Tesla's stock has advanced 66% over the past year, but not because of business fundamentals. Instead, the upside has been driven by expectations that the company will benefit from the ties between CEO Elon Musk and President-elect Donald Trump. Not surprisingly, some analysts are bearish on the stock. Ryan Brinkman at J.P. Morgan recently reiterated his sell rating on Tesla, keeping his target price at $135 per share, which implies 66% downside from its current share price of $395.

The primary catalysts for the potential downside in Tesla shares are the unproven autonomous driving technology and the stock's expensive valuation. Much of Tesla's valuation is based on products that have yet to become material revenue streams, such as full self-driving (FSD) software and robotaxi services. Investors who lack confidence in the autonomous driving narrative may avoid the stock or sell their shares.

Tesla's current valuation of 164 times adjusted earnings is considered absurdly expensive, given that Wall Street expects adjusted earnings to grow at an annual rate of 27% through 2025. This high valuation leaves the stock vulnerable to a correction if earnings growth fails to meet expectations or if the autonomous driving narrative proves to be overhyped.



In conclusion, while Apple and Tesla have been popular AI stocks, certain Wall Street analysts have identified potential catalysts for significant declines in their share prices. Investors should be aware of these risks and consider the current valuations of these stocks before making any investment decisions. As always, it is essential to conduct thorough research and consider seeking professional advice before investing in any stock.