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".

The allegation by Drew McMaster follows a Sunday Times investigation into the use of performance-enhancing drugs among elite athletes
The Commonwealth gold medallist, who has admitted taking steroids, made the claims on BBC Radio Scotland.
He said "at least four" rugby players and two Edinburgh footballers took drugs.
He told interviewer John Beattie that the former Scotland rugby international would have known four drug users from his playing days.
Explaining why athletes turn to drugs, Mr McMaster added: "You're single-minded to do everything you can to better yourself within that sport.
"The higher you go up that tree, the more competitive it gets.
"When you're competing at a Commonwealth or world stage... to reach that level and maintain that level you will do anything that you can to basically win.
"That is your state of mind as you come up the ranks because you start off from a certain level and as you go through the various levels to achieve and be successful, you get hungrier and hungrier and hungrier to be successful.
"Therefore the temptation that's put in your way as it were, and you find that it's all around you... over a period of time you do get drawn in."
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He said that he believes very little has changed in sport since the 1980s.
"The only thing that's changed in a large way is the amount of money that's now involved," he added.
"People are prepared to take big risks where there's big money."
Mr McMaster won Commonwealth gold in the 4 x 100m relay alongside Allan Wells as part of the famous flying Scotsman quartet.
Last year he claimed he had secretly recorded conversations with Jimmy Ledingham, the Great Britain team doctor and an Edinburgh GP, who had apparently admitted supplying Wells with steroids.
Allan Wells has strenuously denied the allegations.
In a statement from his lawyer when the claims were made, he said: "It is denied that any drugs were provided by Dr Jimmy Ledingham.
"It is not true our client had used any banned performance drugsâ€¦ at anyâ€¦ time in his athletics career."
He has previously criticised his former colleague, saying: "The truth is, McMaster turned to steroids because I started beating him - and I was not using drugs."
Earlier this year BBC Sport revealed that only eight drugs tests were conducted in Scottish football over a nine-month period between April and December 2015. There were 1,583 tests in English football over the same period.
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.
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A former athlete has claimed he knew of Scottish rugby players and footballers who doped in the 1980s.