Nasdaq Stocks Are Expected to Fall as the Second Half of the Year Begins

Not all stocks can continue their upward trajectory in the current bull market, even as markets have surged this year, largely driven by the artificial intelligence trade. AI leaders like Nvidia have been at the forefront, with the graphics processing unit manufacturer soaring an astonishing 176% so far this year.

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The current rally has propelled all three major averages to record high closings. In 2024, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite have gained 15%, 3%, and 19%, respectively.

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With a series of rate cuts anticipated in the near future, many investors remain optimistic that the rally will maintain its momentum. Some even believe that equities could climb further from their current levels.

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However, despite the overall positive outlook for the stock market, certain stocks are expected to decline. Using data from LSEG, CNBC Pro screened for Nasdaq 100 stocks that analysts predict will fall by at least 5% or more.

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Nvidia, which recently completed a 10-for-1 stock split, is among the names expected to see a pullback. Although the average analyst consensus rates the stock as a buy, the consensus price target forecasts an 11% decline from its current level.

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On Tuesday, a tweet from Bespoke Investing Group described Nvidia as a megacap stock in “extreme overbought territory,” noting that it is trading at a level two standard deviations above its 50-day moving average.

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Another stock on the list is semiconductor equipment maker Lam Research. The stock has risen 34% this year, bolstered by the announcement of a $10 billion share buyback plan and a 10-for-1 stock split earlier this month.

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Other semiconductor stocks expected to see a pullback include KLA, Qualcomm, and Texas Instruments. These stocks have increased by 43%, 48%, and 13%, respectively, this year.

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Despite the robust performance of these stocks, analysts foresee a potential decline. This sentiment is based on various factors, including their recent rapid price increases and overbought conditions, as measured by technical indicators such as the relative strength index (RSI).

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For instance, Nvidia’s spectacular rise has put it in a precarious position. While its long-term prospects remain strong due to its leadership in the AI space, the stock’s short-term outlook is less certain. The significant gains this year have led to concerns about its valuation, making it susceptible to a pullback.

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Lam Research, despite its impressive performance and strategic moves such as the share buyback plan, also faces similar concerns. The rapid price appreciation has left the stock overextended, and analysts suggest a potential correction.

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Similarly, KLA, Qualcomm, and Texas Instruments, all of which have benefited from the semiconductor boom, are now viewed as overbought. Their substantial gains this year have led to high valuations, which could prompt a selloff as investors take profits.

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In summary, while the overall market remains in a bullish phase, driven by the AI trade and optimistic investor sentiment, not all stocks are expected to continue their upward trajectory. Nvidia, Lam Research, KLA, Qualcomm, and Texas Instruments are among those that analysts predict could see a decline in the near future. Investors should remain cautious and consider these potential pullbacks when making investment decisions.

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