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Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Evercore says concerns over Nvidia Blackwell delays ‘overblown’
Evercore ISI analysts recommend buying Nvidia (NASDAQ:) shares ahead of the chipmaker’s upcoming July-quarter earnings report, saying recent concerns about a potential delay in the release of Blackwell’s system are “overblown.”
The investment bank confirms that demand for NVIDIA systems remains strong, as evidenced by a 20% quarter-on-quarter increase in large capital expenditures (CapEx) during the second quarter of 2024. CapEx is expected to grow an additional 8% in the third quarter and 10% in the fourth quarter.
Earlier reports suggested that Nvidia’s long-awaited Blackwell system, which features next-generation AI chips, could face delays of up to three months. The news has raised investor concerns about the sustainability of Nvidia’s stock rally.
Evercore analysts reviewed past Nvidia product disruptions in 2008, 2022, and 2023, and concluded that while a negative announcement could result in a short-term stock drop of 5%-10%, Nvidia has consistently shown resilience in quickly developing alternative solutions.
“Furthermore, in the event of any delay, we believe demand is so strong, particularly from Tier 2 and 3 cloud providers and enterprises, that current-generation Hopper solutions will be purchased even if Blackwell is squeezed,” the analysts noted.
Evercore continues to view Nvidia as “the best pick in the tectonic shift in computing,” asserting that the company is well-positioned to capture up to 80% of the value in the era of parallel processing. The analysts also expect Nvidia to generate more than $10 in earnings per share by 2030 “and could eventually grow to a 10-15% weighting in the S&P 500.”
They raised their estimates for Nvidia’s performance in the third quarter and 2024, along with increasing the price target on the stock from $145 to $150.
MoffettNathanson: Apple’s AI capabilities are already priced
Apple (NASDAQ:) is positioned to be a significant player in artificial intelligence, but that potential has already been factored into its stock price, MoffettNathanson said in a note to clients.
The firm, which initiated coverage of Apple with a neutral rating and set a price target of $211 per share, acknowledged Apple’s aggressive AI strategy but noted that the market had already anticipated and priced in these developments.
“Apple is poised to win in AI,” analysts at MoffettNathanson said, but cautioned that “this is exactly what is already priced in.”
They noted that despite previous concerns about Apple lagging behind in AI, the market has consistently shown confidence in the company’s strategy. This was particularly evident after the Worldwide Developers Conference (WWDC), where Apple confirmed many of its AI-related plans.
“By the time of Apple’s WWDC in June, the broad outlines of Apple’s ‘contextual awareness’ AI strategy were already anticipated by the tech pundit, and thus by the market as well,” the note reads.
MoffettNathanson stressed that Apple’s AI approach benefits from the trust of more than a billion users, especially in dealing with personal data such as contacts and emails, which remain under Apple’s exclusive control.
Apple’s strategy is likely to drive the iPhone upgrade cycle, the company added, but the potential impact of that cycle is already reflected in the stock’s current valuation.
“Apple’s new AI functionality will be introduced to service the iPhone upgrade cycle — Apple, after all, is still primarily a hardware provider — as taking advantage of resident inference capabilities requires at least 8GB of RAM and a neural processor that phones older than the iPhone 15 Pro don’t have,” they explained.
Edward Jones Initiates Coverage of AMD Shares
Earlier in the week, analysts at Edward Jones initiated research coverage of Advanced Micro Devices (NASDAQ:) with a buy rating and added the semiconductor giant to their list of focus stocks.
The company sees several catalysts that could lead to significant growth for AMD in the coming years.
The main factor behind Edward Jones’ bullish outlook is the growing demand for data center infrastructure, which is expected to boost sales of AMD’s GPUs and CPUs.
Analysts stressed that “growing demand for data center infrastructure should help drive accelerated sales” of these vital products.
One of the factors driving Edward Jones’ bullish stance is AMD’s acquisition of Xilinx (NASDAQ:).
“While the acquisition of Xilinx adds new programmable chip products and end markets to AMD’s business, we believe the company is still in the early stages of cross-selling and integrating Xilinx and AMD products,” the company said.
The integration of Xilinx’s programmable chip products with AMD’s existing offerings is still in its early stages, but Edward Jones sees significant potential for cross-selling opportunities, which management estimates could be worth as much as $10 billion.
Additionally, the company points to the possibility of a prolonged upgrade cycle in the PC market driven by AI-powered PCs, which could further support AMD’s growth.
Analysts believe AMD’s positive outlook “is not fully reflected in the stock price,” making it an attractive investment opportunity at current levels.
Bank of America Downgrades Silicon Motion Twice for Sale
Shares of Silicon Motion Technology (NASDAQ:) fell on Friday after Bank of America analysts issued a double-buy rating downgrade on the NAND flash controller supplier.
Reuters Securities downgraded SIMO shares to Underperform from Buy, citing expectations of limited growth after a rally in the first half of 2024.
Analysts noted that the company’s guidance for the second half already indicates little revenue growth compared to the second quarter of 2024. Their updated analysis also points to low growth in 2025 for sales, operating profit, and earnings per share.
“The main reason is likely to be low exposure to AI and enterprise SSDs, areas dominated by Samsung Electronics (KS:) and SK Hynix respectively,” the analysts wrote.
Bank of America also cut its earnings per share estimates for the second half of 2024 and 2025 by about 20%, driven by lower revenue and operating margin assumptions than their previous forecast.
The investment bank stressed that SIMO’s revenue comes primarily from “controller ICs” for NAND products, setting it apart from its competitor, Phison Electronics.
Given the limited growth outlook beyond the first half of 2024, analysts lowered their price target on SIMO to $60 from $90.
More broadly, Bank of America also noted that while demand for AI server chips remains strong, demand for commodity memory has weakened significantly.
Bernstein Downgrades Baidu on Expected Stock Pressure
Analysts at Bernstein on Friday downgraded Baidu Inc. (NASDAQ:) from outperform to market perform following the company’s latest earnings report and lowered their price target to $97 from $130.
Analysts expect the stock to trade sideways due to increasing turmoil and less clarity about future prospects.
They noted that they expected further disruption to search results in the near term and limited signs of success in the next few quarters (which would have allowed investors to look longer term).
The company also lowered its search growth forecast by 5 percentage points for the second half of 2024 and 3 percentage points for 2025, and is currently pricing the stock on a bearish outlook without factoring in any potential gains from AI search initiatives.
“AI Cloud and Robotaxi stocks are positive, but absent a recovery in Search, we expect stocks to remain under pressure,” Bernstein analysts added.
