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!
UBS cuts Tesla (NASDAQ:TSLA) to Sell on valuation reassessment, high AI costs
UBS analysts on Friday downgraded Tesla stock from Neutral to Sell, while raising the price target from $147 to $197.
This adjustment aims to reflect a reassessment of Tesla's valuation amid market expectations for its growth, particularly in AI.
The UBS acknowledged Tesla's diversification beyond automotive manufacturing, citing positive developments in its Energy and Full Self-Driving (FSD) segments as supportive factors.
However, expectations for Tesla's core auto business are declining, analysts cautioned. They noted that Tesla's valuation has historically included a premium for its potential growth in various areas. Still, the challenge lies in accurately valuing this "optionality."
Recently, Tesla's premium has expanded due to increased enthusiasm around AI. After evaluating Tesla's various segments, UBS concluded that the current stock price implies a value of over $500 billion for future growth initiatives.
To justify the current stock levels, Tesla would need to achieve a future value of $1 trillion within five years, and even more to support a Buy rating, analysts said.
They also raised concerns over the high costs of AI investments, the unpredictable pace of improvement, and the long-term nature of potential returns. The firm warned that if market excitement for AI diminishes, Tesla's stock multiple could be negatively impacted.
With the stock trading at 86 times the next twelve months (NTM) P/E, the lack of visibility and potential for delayed growth opportunities warranted the downgrade to Sell, UBS said.
BofA ups Apple (NASDAQ:AAPL) price target on AI-driven iPhone upgrade cycle
Bank of America raised its price target for Apple to $256, up from $230, in a note to clients on Thursday, citing increased confidence in a multi-year iPhone upgrade cycle.
The hike is driven by a global smartphone survey and analysis of Apple's aging installed base, indicating strong upside potential.
"We are raising our PO on Apple to $256 on increased confidence of a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should provide a boost to customers' intentions to upgrade," analysts wrote in a note.
The survey, conducted in the US, UK, China, and India, revealed that a large portion of iPhone users still use older models: 29% own an iPhone 13, 13% have an iPhone 12, and over 31% have an iPhone 11 or older.
The note also highlighted that the recent Worldwide Developers Conference (WWDC) has increased customer intentions to upgrade in 2024. This is further supported by strong services growth and margin expansion, prompting BofA to reiterate a positive outlook on AAPL.
Nomura downgrades SMCI amid ‘limited share price upside’
Earlier in the week, Nomura research analysts downgraded Super Micro Computer (NASDAQ:SMCI) stock from Buy to Neutral due to “limited share price upside.”
“After Supermicro’s strong guidance for CY4Q23-CY1Q24, we believe Supermico’s performance potential changed from 'easy to beat low market expectations' in CY4Q23 to 'less room to beat already-high market expectations',” analysts noted.
Nomura's revised outlook is due to uncertainties surrounding the gradual easing of CoWoS-S supply in 2024 and the potential transition period between Nvidia’s Hopper and Blackwell GPUs in the second half of the year.
While SMCI’s advanced liquid cooling solutions provide a competitive edge and support gross profit margins, analysts said that limited order visibility amid these uncertainties could make it challenging to exceed sales expectations “and thus this could be a mixed bag, in our view,” Nomura’s team added.
The firm expects AI server maker’s June quarterly sales to align with its guidance of $5.1-$5.5 billion, noting that some liquid cooling projects have been delayed to later quarters, reducing the likelihood of surpassing the guidance.
Nomura analysts also believe Supermicro’s near- to mid-term outlook remains unclear due to potential AI server order uncertainties. This is due to new procurement decisions by leading customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which may affect SMCI as customers lean towards adopting Blackwell GPU solutions.
Microsoft (NASDAQ:MSFT) is still a GenAI leader - Morgan Stanley
Morgan Stanley analysts said Microsoft remains a strong GenAI leader, citing a recent 2Q24 CIO survey.
The survey data shows Microsoft's leadership in GenAI is driving substantial incremental IT share gains.
"Microsoft's lead in terms of core spending intentions and positioning in GenAI is improving more meaningfully," analysts said in a note.
Core spending growth expectations for Microsoft rose to 6.6%, the highest since Q2 2021. This increase is largely due to Microsoft's strong presence in GenAI functionality and its Azure Cloud business.
CIOs are particularly optimistic about Microsoft's GenAI products. The survey reveals that 94% of CIOs plan to adopt Microsoft Generative AI products in the next 12 months, up from 63% in Q4 2023 and 47% in Q2 2023.
Microsoft 365 Copilot is the preferred solution, with 68% of CIOs intending to use it, followed by Azure OpenAI Services at 41%.
Keybanc hikes PTs on AI chipmakers as AI boom marches on
KeyBanc Capital Markets lifted price targets for several major chipmakers, reiterating robust demand for AI products.
KeyBanc highlighted a significant recovery in traditional server demand, primarily driven by major U.S. cloud providers like Meta (NASDAQ:META) and Microsoft, along with sustained demand from Chinese cloud service providers (CSPs) and moderately improving demand within the Enterprise sector.
“For 2024, we’re increasing our total server shipment estimates to +7% vs. +4% prior, with Enterprise +5% and Cloud +8%,” analysts stated. They also project AI servers to grow by 150% to approximately 450,000 units in 2024.
Regarding Nvidia’s GB200, KeyBanc believes that the NVL72 configuration will dominate demand in 2025 over the NVL36. The NVL72 offers performance 20-30 times greater than the H100 and provides the lowest cost per token solution. Thus, they expect GB200 to generate over $200 billion in data center revenues for the chipmaker in 2025.
KeyBanc has revised its price targets for several leading chip stocks, including NVDA from $130 to $180, Monolithic Power (NASDAQ:MPWR) from $850 to $975, Cirrus Logic (NASDAQ:CRUS) from $120 to $155, and Marvell (NASDAQ:MRVL) Technology from $90 to $95.