Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!
Rosenblatt downgrades Google stock amid rising transition risk
A Rosenblatt analyst downgraded Alphabet (NASDAQ:GOOG) stock from Buy to Neutral, based on “multiple areas of transitional risk that recommend stepping back for a little while to see how the company handles it.”
The investment bank identified several risks for the tech giant, including the impact of AI on search, which could negatively affect search ad revenues due to the introduction of AI Overviews. The analyst also noted emerging evidence of search share loss to Bing.
Moreover, the shift of search ad revenue to retail media networks is expected to accelerate as retailers like Walmart (NYSE:WMT) follow Amazon's (NASDAQ:AMZN) lead in this area.
Another risk highlighted by Rosenblatt is Amazon’s aggressive entry into video advertising, with ads becoming default on Prime Video this year and a strong upfront sales effort launched in May, potentially affecting ad sales dynamics at YouTube.
“We also see risk that competitive dynamics push Alphabet into a higher-than-anticipated capex spending cycle for AI,” the analyst added.
Truist on Nvidia: 'Number one can become number one-er'
NVIDIA Corporation (NASDAQ:NVDA) has recently become the number one company in terms of market valuation, and according to Truist Securities analysts, the company can go from being number one to “number on-er.”
On June 18, Nvidia’s market cap reached $3.34 trillion, surpassing Microsoft (NASDAQ:MSFT) as the world’s most valuable public company. However, Nvidia’s shares subsequently declined over several sessions, causing it to lose the top spot.
“We considered that, even if fundamentals cooperate, stock upside could be limited owing to trading and technical challenges related to NVDA's #1 market cap position,” Truist analysts noted.
Despite this, Truist's analysis suggests that attaining the largest market cap does not inherently hinder future investment returns.
The firm reviewed the investment returns and valuations of stocks that have previously held the top market capitalization over the past 26 years, including Microsoft, Cisco (NASDAQ:CSCO), ExxonMobil (NYSE:XOM), Apple and Amazon.
The findings showed that most of these stocks underperformed relative to the S&P 500 index over short-term periods of one week, one month, and three months after reaching the top market cap position. However, over longer periods of one year, three years, and five years, these stocks generally outperformed the S&P 500, Truist analysts pointed out.
Rosenblatt ups Apple to Buy, says privacy-focused AI can boost market share
Rosenblatt Securities upgraded Apple Inc (NASDAQ:AAPL) stock to Buy this week, citing the potential of the company's privacy-focused Apple Intelligence platform to boost market share in the AI sector.
This decision follows a survey conducted by Rosenblatt, revealing that privacy is the most sought-after feature among US consumers in AI technology.
The survey, which garnered over 500 responses, used a "MaxDiff" ranking system to assess 15 key features of early smartphone AI. Privacy emerged as the top priority, with 17.8% positive responses, outpacing the next-ranked feature, Insight, by 5.6 percentage points.
“Given that Apple has uniquely flagged Private Cloud Compute as core to its approach, building on a recent history of stronger advertising privacy safeguards in its app store and contrasted with AI privacy mishaps from rivals, Apple appears positioned to gain brand interest and AI market share from its out-of-the-gate focus on strong privacy,” analysts wrote.
Rosenblatt also highlighted Apple's strategic focus on specialized large language models (LLMs) and Apple silicon, which seems to protect the company from the cost pressures impacting other tech giants.
Analysts raise price targets on Micron despite post-earnings decline
Shares in AI memory chipmaker Micron Technology Inc (NASDAQ:MU) fell after it released the latest quarterly results on Wednesday.
Citi analysts attributed the decline to the company’s conservative guidance and increased capital expenditure. However, they maintained a positive outlook, suggesting that investors should “buy MU on weakness as the DRAM upturn thesis remains intact and we expect sequentially higher revenue, EPS, and gross margins through C25.”
Reflecting this view, Citi reiterated a Buy rating with a price target of $175 for Micron stock, raising their fiscal 2024 earnings per share (EPS) estimate from $0.52 to $0.66.
JPMorgan analysts shared a similar sentiment, expressing confidence in Micron’s ability to capitalize on memory content demand driven by AI and accelerated compute server deployments. They noted that the company’s HBM3e capacity is sold out through 2025 and is beginning to see demand for 2026.
“Gross margins for HBM3e and eSSD are both accretive to their respective segments and we believe that should structurally augment their profitability profile in combination with cyclical demand/supply related pricing increases,” JPMorgan’s analysts wrote.
“We believe the stock should continue to outperform through 2024 and into 2025 as the market continues to discount improving revenue/margin/earnings power.”
JPMorgan reiterated an Overweight rating on Micron stock, setting a December 2025 price target of $180, and highlighted MU as “one of our top picks in semis next year.”
Stifel starts Tesla at Buy, sees strong potential in AI-based FSD
Earlier this week, analysts at investment bank Stifel started research coverage on Tesla Inc (NASDAQ:TSLA) with a Buy rating and a price target of $265.00.
They believe Tesla is well-positioned for substantial growth over the next few years, particularly from 2025 to 2027. In the short term, the updated Model 3 and the forthcoming Model Y refresh are expected to boost sales. Further, the production of the next-generation Model 2 is anticipated to attract high demand.
“We also believe TSLA's AI-based Full Self-Driving (FSD) initiative has the potential to generate significant value through sales of FSD, possible licensing agreements, and as a critical driver of longer-term RoboTaxi initiatives,” Stifel analysts wrote.
However, they also highlighted some near-term risks, including delivery levels after underwhelming first-quarter 2024 results, challenges in EV adoption, and uncertainties related to the U.S. election.