Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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JPMorgan upgrades Dell, promotes Arista
JPMorgan analysts upgraded Dell Technologies Inc (NYSE:DELL) to Overweight from Neutral, citing the company’s leverage to the AI-led Compute investment cycle.
The cycle “will benefit branded server companies (DELL and HPE in our coverage), even as the drivers for the remaining businesses are more mixed, being subject to the macro backdrop,” the analyst said.
Similarly, they promoted Arista Networks (NYSE:ANET) to top pick on accelerating growth from AI ramp.
“We expect the valuation premium currently (33x P/E vs. long-term average of 28x) to be sustained or even expand as AI revenues ramp, driving higher visibility into the driver for growth acceleration.”
BMO says Alphabet and Amazon best-positioned AI wise
BMO initiated research coverage of 25 stocks in the internet sector, including sub sectors like digital advertising, ecommerce, online travel, advertising/marketing-tech and interactive media.
When it comes to AI, BMO analysts highlighted Alphabet Inc (NASDAQ:GOOGL) as best-positioned to “benefit from the proliferation of generative AI and large language models.”
“While the acquisition of DeepMind in 2014 resulted in a step function increase in AI capabilities, Google has integrated machine learning (“ML”) into its core products since 2000 – this effectively gives Alphabet a 10+ year head start relative to the industry.”
Elsewhere, Amazon.com Inc (NASDAQ:AMZN) is also mentioned as the e-commerce stock is expected “to benefit from artificial intelligence/machine learning given its investments in Trainium and Inferentia chips as well as the middle layer of the stack in Bedrock and CodeWhisperer.”
AI rises to the top of the CIO's priority list
The anticipation of increased growth in IT spending for 2024 remains consistent, as reflected in Morgan Stanley’s Q4 CIO survey. Aligned with heightened investor enthusiasm, CIOs have elevated AI and ML to the forefront of their Priority List, with 68% acknowledging its impact on their existing IT budgets.
“Our 4Q23 CIO survey suggested overall IT spending growth accelerates from 2.6% in 2023 to 3.3% in 2024, but still below the 4.1% 10-year average (preCovid) AI/ML rose to the top of the CIO priority list for the first time, followed by Data Warehousing/Analytics and Security,” analysts said.
“Perhaps most surprisingly, post optimization the percentage of workloads running in the Public Cloud jumped from 29% in our 2Q23 survey to 36% in 4Q23. The percentage of workloads expected to run in the Public Cloud 3 years forward expanded from 46% to 53%.”
Marvell PT raised at BofA
Bank of America analysts raised the price target for Marvell Technology Inc (NASDAQ:MRVL) from $68 to $80 per share.
This positive revision is grounded in the progress of the custom AI chip ramp. Following discussions with the company's management team during the CES tradeshow in Las Vegas, BofA observed promising trends in cloud AI demand, influencing the decision to raise the price target.
"Our discussions with NVDA and MRVL were very positive, with both vendors (along with AVGO, AMD (NASDAQ:AMD)) supplying critical compute and networking parts to cloud customers," said BofA.
"The MRVL discussion indicated their custom AI chip ramp could be 1.5-2x the $250mn/$450mn we assumed prior for CY24/25E."
Baidu primed to be an active AI contributor - Macquarie
Macquarie started coverage of Baidu Inc (NASDAQ:BIDU) with an Outperform rating and set a target price of $150 per share, according to a note released on Thursday.
Analysts communicated to investors that Baidu's strategic emphasis on its core advertising business is expected to contribute to a stable market share. Furthermore, the company is poised to capitalize on a potential cyclical rebound in advertising budgets, indicating additional room for growth.
"Baidu has been allocating above-average R&D resources to build a full-stack AI that covers both to-enterprise and to-consumer scenarios," added the analysts.
"While revenue contribution from GenAI remains small at low-single-digit %, we expect Baidu to maintain its leading position in China's AI Cloud market on the back of its strong AI capabilities and improving market recognition."
