3 AI Stocks Down More Than 50% From 52-Week Highs. Could They Be Buying Opportunities Now?

It’s hard not to get carried away by the hype surrounding artificial intelligence (AI) when analysts are predicting such big growth. Grand View Research predicts the AI ​​market will be worth $1.8 billion by 2030 trillionup from about $279 billion this year. With that kind of growth, investors who don’t own AI stocks might feel like they’re missing out.

But buying shares of a chip maker Nvidia or other AI stocks that have already generated huge gains may not be as enticing given their high valuations. Buying at such high levels could limit the gains you make from the stock in both the short and long term.

Another option is to consider AI stocks, which have been struggling recently. You may be taking on more risk, but you could make a lot of money if they eventually rebound. Snowflake (SNOW -3.29%), Super microcomputer (SMCI 4.59%)AND SoundHound AI (SOUND -0.80%) all AI stocks are down more than 50% from their 52-week highs. Below, I’ve ranked them by how likely they are to turn things around.

1. Supermicrocomputer

Super Micro Computer, also known as Supermicro, was one of the hottest AI stocks to buy earlier this year. But it has been struggling for weeks after its fiscal 2024 fourth-quarter earnings release and a report from a notorious short seller at Hindenburg questioning the company’s accounting practices. While such reports can be biased and contain unsubstantiated allegations, investors are nonetheless bearish on the stock in the wake of these events.

Supermicro stock is currently trading at about $450 per share, more than 60% below its 52-week high of $1,229. The company is growing rapidly as it provides customers with servers and IT infrastructure to help them grow their businesses, especially as it expands its AI products and services.

In the fiscal year ended June 30, Supermicro’s sales totaled $14.9 billion, up 110% year over year. Profits also rose from $640 million to $1.2 billion. However, the latest earnings report has investors worried because the company’s gross margin is shrinking, which could drastically hurt its earnings outlook if the trend continues.

Supermicro is an intriguing contrast buy, as Hindenburg’s brief and latest quarterly results have managed to overshadow what is still an incredible growth streak. There are risks from its shrinking margins, but it could be an AI stock worth taking a chance on now.

2. Snowflake

Data storage company Snowflake is struggling in 2024 after posting unimpressive results, with investors pessimistic since the company’s CEO unexpectedly retired earlier in the year. It also didn’t help that the company was involved in a major data breach that affected multiple major customers. Down more than 40% year to date, Snowflake’s decline has continued since the stock peaked in late 2021.

For Snowflake to turn things around, it needs to deliver better numbers, especially on the bottom line. While the company has been growing its business, it’s not exactly encouraging when its losses have also been growing. In the first two quarters of this year, Snowflake’s operating loss widened 26% year over year to $703.9 million, nearly matching the 31% revenue growth in the same period. Worse, management has lowered its margin guidance for the full fiscal year 2025.

Until Snowflake shows it has a chance of future profitability, I would avoid investing in this stock.

3. SoundHound AI

SoundHound AI stock skyrocketed earlier this year when investors learned Nvidia had invested in the company. While the stock has stabilized in recent months, it’s still up more than 130% year to date, even after falling 52% from a peak of $10.25.

SoundHound’s voice AI technology can help restaurants take orders and execute voice commands. While the business is growing, competition in this space is intense, and the numbers may not be high enough to suggest its market share is all that large.

In the second quarter, the company’s revenue rose 54% to $13.5 million, but its net loss widened 60% to $37.3 million.

There is still a lot of uncertainty surrounding SoundHound AI, and it is probably the riskiest pick on this list given its very high valuation. I would avoid it despite the sell-off.

David Jagielski has no position in any stocks mentioned. The Motley Fool has a position in and recommends Nvidia and Snowflake. The Motley Fool has a disclosure policy.