The All Wales Medicines Strategy Group (AWMSG) has advised the Welsh Government not to fund the daily pill Prep.
It said the case for cost-effectiveness "had not been proven".
It comes weeks after Scotland's medicines body backed its use.
Scientists have found a daily dose of the drug can protect people at high risk of contracting the virus.
Around 150 new people are diagnosed with HIV in Wales each year, nearly half from sexually transmitted infection between men.
The drug is suggested for people at high risk who might not have safe sex. One estimate is it might cost Â£2.5m a year in Wales.
An independent HIV expert group has already  called it "highly effective" when used with the right groups and in the right doses.
AWMSG said there were "several uncertainties and limitations" in the economic model provided by the drug company.
The firm insisted there was a "robust clinical and cost-effectiveness case".
What does Prep do?
Sarah Fuhrmann, national director for Terrence Higgins Trust in Wales, said: "We are disappointed by this short-sighted recommendation.
"For every person who receives an HIV diagnosis, the Welsh NHS will pay on average Â£360,000 in lifetime treatment costs. Prep can save the NHS this money in the long term, whilst taking us one step closer to ending the HIV epidemic.
"We realise this is not the final decision, but if acted upon, this advice would lead to a postcode lottery within the UK, with major inequalities between borders in terms of who is protected against HIV."
Scotland is due to become the first place in the UK to routinely offer Prep.
A Welsh Government spokesman said the health secretary would consider the recommendation and "make an announcement in due course".
A "game-changing" drug which dramatically cuts the chances of being infected with HIV should not be provided by the NHS in Wales, a body has recommended.