Investors have been waiting for decades for a new innovation or trend that could do for the American economy what the Internet did some three decades ago. After much patience, the artificial intelligence (AI) revolution seems to be answering that call.

The appeal of AI lies in the ability of software and systems to learn without human intervention. This ability to evolve over time and become more competent at assigned tasks, if not learn entirely new skills, gives the technology unlimited possibilities in the long term.

In less than 18 months, the euphoria surrounding AI NVIDIA‘S (NASDAQ: NVDA) The market cap increased by more than $3 trillion, necessitating a historic 10-for-1 stock split. But after such a monstrous run in Nvidia, some Wall Street analysts have turned their attention to other hypergrowth AI stocks that they believe offer upside potential of as much as 243%.

Headwinds for Wall Street’s AI darling are increasing

While there is no shortage of Wall Street analysts who still see upside potential for Wall Street’s darling in the field of artificial intelligence, there is no denying that Nvidia is increasingly facing headwinds.

Historical precedent is undoubtedly the biggest warning sign. For 30 years, there hasn’t been a major innovation or trend that didn’t result in an early-stage bubble. This means that investors often overestimate the adoption and utility of new technologies. The fact that most companies currently lack a clear plan on how they will use AI to grow their revenues and increase their profits is evidence that artificial intelligence is likely the next in a long line of early-stage bubbles.

Beyond history, it is impossible to understand the external And Nvidia will face internal competitive pressures. Although Nvidia is estimated to control 98% of the data center graphics processing unit (GPU) market share in 2022 and 2023, its share of the pie is likely to shrink as new AI GPUs enter the market.

In addition, the top four customers by net revenue, all of which are part of the “Magnificent Seven,” are developing AI chips for use in their data centers. Even if Nvidia’s AI GPUs maintain their compute power advantages, which is quite likely, these top four customers will use their in-house chips to complement Nvidia hardware. This will reduce Nvidia’s future opportunities to win valuable data center space from America’s most influential companies.

Finally, Nvidia’s adjusted gross margin declined for the first time in two years in its fiscal second quarter (ended July 28). The shortage of AI GPUs has fueled the company’s pricing power and its rapid gross margin expansion. But as that shortage eases, Nvidia’s pricing power and gross margin should decline.

Instead of focusing on Nvidia, select Wall Street analysts see greater upside potential in the following two high-growth AI stocks.

Snowflake: Implied upside potential of 93%

The first AI stock that could outperform Nvidia, according to a Wall Street analyst, is the cloud-based data warehouse giant Snowflake (NYSE: SNOW). Analyst Kash Rangan from Goldman Sachs believes Snowflake can reach $220 per share, which would represent a gain of about 93% based on late August levels.

Rangan added Snowflake to Goldman’s Conviction List in July because he believes the company is ideally positioned for the next phases of the AI ​​revolution – the phase(s) in which platforms and AI applications will benefit the most.

Snowflake has long attracted customers with above-average growth and clearly defined competitive advantages. The company’s infrastructure is based on the most popular cloud infrastructure service platforms to avoid data sharing limitations for customers.

In addition, the company has abandoned the traditional subscription model in favor of a pay-as-you-go platform, where customers are charged based on the amount of data they store and the number of Snowflake Compute Credits they use. There’s no doubt that this cost transparency is well received by customers.

Unfortunately, Snowflake’s once-staggering growth rate has cooled significantly. Year-over-year organic growth rates, which exceeded 70% in the second quarter of fiscal 2023 (ended July 31, 2022), are now below 30%. While the company has an impressive backlog of $5.2 billion and continues to add bigger fish to its customer pool, the valuation premium it once commanded no longer makes sense.

For Snowflake to even come close to achieving Rangan’s price target, the company must significantly improve its adjusted profitability and stabilize its year-over-year revenue growth in the 25% range.

Super Micro Computer: Implied upside potential of 243%

A second hypergrowth stock in the artificial intelligence space with tempting upside potential, based on a Wall Street analyst’s forecast, is rack server and storage solutions specialist Super-microcomputer (NASDAQ:SMCI)Ananda Baruah of Loop Capital expects Super Micro shares to eventually hit $1,500, which would represent more than a tripling of the August 30 closing price.

Loop’s price target for Super Micro is based on the company’s strong positioning in the AI ​​server market. Companies that want to secure a first-mover advantage in the AI ​​space will be forced to invest heavily in the infrastructure required to do so.

We’ve definitely seen evidence that demand for Super Micro’s servers is incredibly strong. After reporting 110% net revenue growth in fiscal 2024 (which ended June 30), the midpoint of the company’s fiscal 2025 revenue forecast ($28 billion) implies 87% revenue growth in the current year. Although the Wall Street consensus is predicting earnings per share above $45 in fiscal 2026 (which ended June 30, 2026), Super Micro is currently valued at a price-to-earnings (P/E) ratio of less than 10.

Things seem almost too good to be true – and that might be true.

Last week, well-known short-seller Hindenburg Research published a report that, among other things, provided evidence of accounting manipulation at Super Micro Computer. This short-seller report was followed a few days later by Super Micro’s delay in filing its annual report. While this is not an admission of wrongdoing, nor does it confirm Hindenburg’s findings, it is causing a stir at a sensitive time for the company.

In addition, Super Micro Computer has a history of failing to meet high growth expectations. It failed to meet aggressive revenue growth forecasts during the initial cloud computing boom in the mid-2010s. Considering what history teaches us about the next big innovations and the time they take to mature, skepticism seems entirely appropriate with Super Micro, despite its historically low valuation.

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Sean Williams does not own any stocks mentioned. The Motley Fool owns and recommends Goldman Sachs Group, Nvidia, and Snowflake. The Motley Fool has a disclosure policy.

Forget Nvidia: 2 Hypergrowth Artificial Intelligence (AI) Stocks With Up to 243% Upside Potential, According to Select Wall Street Analysts was originally published by The Motley Fool