Over the last several months, many stocks that were once among the marketâs most prized darlings have taken significant hits. Various circumstances and events, like DeepSeek, trade wars, and rising valuation concerns, have led to these big drawdowns. In 2025, the market has hit the technology and consumer discretionary sectors particularly hard.
Both rank in the bottom three in sector performance as of the May 23 close.
Unsurprisingly, two of the names on this list of once-soaring stocks that are down 50% or more from their 52-week highs are in these sectors. The other is a once red-hot communication services stock that has significant tech and consumer discretionary drivers.
Below are the details on these three names looking to return to their former glory. Unless otherwise indicated, all data points use information as of the May 23 close.
Could Marvellâs Broadcom-Like Recovery Be Coming?
First up is the AI-driven chip stock Marvell Technology (NASDAQ: MRVL). Marvell is often compared to its massively larger rival, Broadcom (NASDAQ: AVGO). This is because both companies are deeply involved in the custom semiconductor space. They design chips that help meet very specific needs for a particular customer.
Marvell reached its all-time high on Jan. 23, 2025. From the beginning of 2023 to that point, Marvell shares provided a staggering total return of around 243%.
However, things took a turn for the worse soon after.
Marvell shares dropped over 19% in one day on Jan. 27 in reaction to the DeepSeek revelations coming out of China. Generalized market fears and trade war escalation set the stock on a nearly straight down path once February began.
Now, Marvell shares are down approximately 52% from their 52-week high. Marvellâs forward price-to-earnings (P/E) ratio has more than halved, dropping from nearly 49x to just under 22x. This figure now sits very solidly below Broadcomâs 33x, after being significantly higher than Broadcomâs forward P/E prior.
Marvell shares have yet to recover robustly like Broadcom. So far during Q2, Marvell shares are down slightly, while Broadcomâs are up nearly 37%.
This sets up the potential for Marvell to outperform Broadcom going forward.
Reddit Is Down Over 55% After Incredible Post-IPO Run
Next up is the communications stock that somewhat sits between sectors, Reddit (NYSE: RDDT). Its users, who are consumers, drive the platform, and it leverages technology to monetize their engagement. During 2024, Reddit was among the most high-flying stocks in the market.
After the firmâs initial public offering (IPO) in May 2024, the stock reached an all-time high on Feb. 10, 2025. Over that period, the stock rose by over 340%. However, since that high, shares are down by 56%.
The stock really started to slide just days after due to reporting slower-than-expected user growth in Q4 2024. For stocks that have appreciated so much in such little time, missing these estimates can create huge downward momentum.
Changes to Google parent company Alphabetâs (NASDAQ: GOOGL) search algorithm and added AI search features have also raised significant concerns that less traffic will go to Reddit in the future.
Last up is CAVA Group (NYSE: CAVA). Since going public in June 2023, CAVA rose to an all-time high of over $173, gaining approximately 312%. CAVA reached this high during intraday trading on Nov. 13, although the stock closed at around $147 that day.
Still, from that intraday high, shares of CAVA are down nearly 52%. Analysts issued multiple substantial downgrades that hit the stock hard in February after it reported Q4 2024 results, causing shares to drop big-time. Macroeconomic and consumer spending fears have also weighed on the stock.
Overall, the huge decline in these stocks indicates that there could be substantial room for recovery going forward.
Marvellâs lack of recovery compared to Broadcom is particularly interesting. The companyâs May 29 earnings release allows it to follow in Broadcomâs footsteps and prove its business remains strong. Still, the company must deliver impressive results and commentary to stop its slide.
Shares of Tesla Inc. (NASDAQ: TSLA) opened just over $350 on Tuesday and started up after the long Memorial Day weekend with some seriously strong momentum.
The stock is now up over 55% from its April low, with the last two weeks marked by tight consolidation and base buildingâthe kind of setup technical traders love heading into a potential breakout.
Now, a powerful new endorsement is adding fuel to the fire. Late last week, Wedbush analyst Dan Ives reiterated his Outperform rating and raised his price target from $350 to $500, a rare 42% single-shot increase.
That implies an almost 50% upside from current levels and would mark a fresh all-time high for the stock.
Autonomous Ambitions Drive the Bull Case
Ives is among the most bullish voices on Wall Street when it comes to Teslaâs long-term potential, particularly as it relates to artificial intelligence and autonomous driving. He argues that the company is on the cusp of a new growth era, with AI at the heart of it. In his view, the upcoming launch of Teslaâs robotaxi platform could be the unlock that reframes the entire valuation.
âWe believe Tesla remains the most undervalued AI play in the market today,â Ives wrote, calling the coming quarters the start of a golden age for autonomy. He also believes regulatory support under a Trump administration could fast-track approval of key initiatives, helping Tesla overcome some of the friction that has slowed its autonomous push to date.
In his latest note, Ives said the AI and autonomy opportunity alone could be worth $1 trillionâenough to justify a path toward a $2 trillion valuation by the end of 2026. While that projection may sound aggressive, it reflects a growing belief among bulls that Tesla is more than just a car company. Itâs now being grouped alongside tech giants like NVIDIA Corp (NASDAQ: NVDA) and Microsoft Corp (NASDAQ: MSFT) as one of the best long-term AI plays on the board.
Muskâs Media Blitz Reinforces the Vision
The latest surge in sentiment also follows Elon Muskâs high-profile interview with CNBC, where he doubled down on Teslaâs ambitions across autonomy, humanoid robotics, and artificial intelligence. Musk confirmed that a significant portion of Teslaâs future growth will hinge on software, particularly in the form of Full Self-Driving and AI agent development.
That messaging appears to have resonated with institutional investors, particularly as Tesla reclaims the narrative around its strategic vision after a rocky start to the year. Musk also pledged to reduce his time spent on government duties by the end of May, clarifying that his commitment to Tesla remains intact despite ongoing involvement with the Department of Government Efficiency.
Some Risks Remain For Tesla
That said, not everyone is convinced the rally can last. While the U.S. narrative is heating up, Teslaâs grip on the European EV market is slipping fast. In April, the company sold just 7,261 vehicles across the region, a 49% year-over-year decline, even as the broader EV sector grew more than 34%. Year-to-date, Teslaâs European sales have dropped nearly 40%, underscoring the severity of the trend.
Political tensions arenât helping. Muskâs alignment with former President Trump and his expanded political role has sparked protests at Tesla dealerships in multiple countries. Brand perception is deteriorating in key European markets, and competition is intensifying. Chinese automaker BYD recently overtook Tesla in European EV sales, while legacy manufacturers like Volkswagen and Mercedes are gaining ground with refreshed lineups and aggressive pricing.
Product fatigue is also said to be creeping in. While a refreshed Model Y has helped stabilize volumes, Tesla has not yet unveiled a new mass-market vehicle, something analysts increasingly cite as critical for driving new growth in the face of stiffening competition.
Can the Momentum Offset Global Concerns?
Tesla is a stock with two stories right now. In the U.S., it is regaining momentum thanks to a powerful AI narrative, bullish price targets, and improving sentiment. But globally, especially in Europe, the company faces real friction.
Whether the next leg higher materializes quickly will likely depend on upcoming developments in autonomy, especially any updates tied to the Robotaxi platform in June. If that narrative takes hold, Tesla could continue to defy the skeptics and move closer to Wedbushâs $500 target.
The Magnificent Seven stocks have been rallying since the end of April. A key catalyst has been better-than-expected earnings and guidance. However, unlike in 2023 and 2024, the stocks arenât trading in unison. Some technology stocksare outperforming the rest, and Microsoft Corporation (NASDAQ: MSFT) is one of those names.
Since hitting its 52-week low in early April, MSFT stock is up approximately 33%. Thatâs turned the stock positive in 2025. Itâs also trading higher over the last 12 months. However, with Memorial Day behind investors, trading volume may go down, leaving investors to wonder what to do with Microsoft before the company reports earnings again in late July.
Over the past year, increased capital expenditures have weighed down Microsoftâs gross margin. The companyâs overall gross margin is not showing a steep decline, but itâs also not growing as some investors would like.
Thatâs because of the companyâs Cloud division and the amount of spending required in the data center area. The company simply didnât have enough capacity to meet the demand. Turning leased space into new physical facilities is crucial to the companyâs AI plans, but Microsoftâs spending came at a cost to earnings and free cash flow.
Thatâs not to say that Microsoft wonât continue to spend, but the kind of spending it will be doing will be more directly aligned with future revenue. In this case, it means the hardware (i.e., CPUs and GPUs) needed to build up the companyâs server infrastructure.
Even though earnings will be pressured, margins are expected to improve, which may be enough to justify a run to the all-time high. At the very least, it supports the long-term bull case for MSFT stock.
Practicing What They Preach Regarding AI
Investors can grow skeptical when they hear companies talk about cost-cutting initiatives. The reasoning is that you canât cut your way to growth. However, investors have been positively giddy about Microsoftâs announcement that it was cutting about 3% of its workforce.
The reason is AI. In this case, Microsoft reported that it is deploying its own AI tools in areas such as customer service, customer support, sales, and finance.
That means the company is maintaining productivity while also improving earnings.
NVIDIA May Be a Short-Term Tell on MSFT Stock
Microsoftâs increased hardware spending is largely coming from NVIDIA. We may learn more about that when NVIDIA reports earnings on May 28. Right now, traders appear to be more bearish in the next three to four months.
Sentiment on those short-duration calls may change if NVIDIA issues strong guidance. And if NVIDIA comes in light, the downside appears already priced into the put options.
However, another reason for the bullish short-term outlook may be partly due to Microsoftâs valuation. At 34x forward earnings, MSFT stock is trading at a premium to its three- and five-year averages.
That said, if momentum traders donât find a better target to shoot for, a large-cap, blue-chip company like Microsoft will continue to attract attention. Traders are becoming more bullish on longer-dated calls, supporting the expectation of stronger economic growth in the yearâs second half. Either way, Microsoft is relevant to where AI is expanding today and is certain to have a seat at the table for where AI moves in the future.
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