The Nasdaq Composite has spent much of March in correction territory, hovering more than 10% below its all-time high. That kind of dip can send shivers through investors, but Wall Street analysts see it as an opportunity—especially when it comes to Arm Holdings and Upstart Holdings. With Arm down 33% from its 2024 peak and Upstart still sitting 86% below its 2021 high, some experts believe these stocks could be ripe for a rebound.
Arm Holdings: 42% Upside, But Is It Realistic?
Arm Holdings isn’t a household name like Intel or AMD, but its technology is everywhere. The company licenses its CPU designs to tech giants, helping them build power-efficient chips for everything from smartphones to cloud computing. The stock, however, has been struggling, down significantly from its 2024 high after issuing cautious guidance in its recent earnings report.
Arm’s revenue rose 19% year over year in the latest quarter, hitting $983 million. Strong demand for energy-efficient AI chips is playing in its favor. Yet, despite a solid performance, the company trimmed its full-year forecast, leaving some investors disappointed. Shares slid as a result.
Wall Street still believes in the stock. The median target price from 41 analysts is $177.50, implying a 42% upside from its current price of around $125. But is that target realistic? Arm is trading at around 85 times adjusted earnings, a hefty valuation even for a high-growth company. For investors willing to take a long-term view, a small position could make sense. But expecting a 42% surge in the short term might be a stretch.
Upstart’s AI-Powered Lending Faces Economic Headwinds
Upstart is a different story. The company is shaking up the lending industry by using artificial intelligence to assess creditworthiness. Over 100 banks and credit unions use its system to make lending decisions. Unlike traditional models that rely on a handful of factors, Upstart’s AI considers thousands of data points, which it claims leads to more accurate approvals and lower interest rates for borrowers.
The stock’s performance, however, tells a different tale. Upstart has been battered by high inflation and rising interest rates—factors that make it harder for consumers to borrow. The result? An 86% drop from its 2021 peak. Even so, its latest earnings report showed signs of life: revenue jumped 56% to $219 million, and the company swung from a loss to a non-GAAP profit of $0.29 per share.
There’s potential here. Analysts have a median price target of $86.50, implying a 57% upside. But Upstart’s fate is closely tied to the broader economy. If inflation ticks higher or borrowing slows, the stock could struggle to gain ground.
What’s Next for These Stocks?
Both Arm and Upstart have significant potential, but they also carry risks. For investors looking at these names, here are key factors to watch:
- For Arm: Growth in AI-related chip demand, competition from x86-based processors, and whether its licensing model continues to attract major clients.
- For Upstart: Interest rate trends, consumer lending appetite, and whether its AI-powered model continues to outperform traditional lending practices.
The broader market slump has made these stocks look more attractive from a valuation standpoint. But whether they hit their lofty price targets depends on external forces—ones that are often unpredictable.
