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Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Rosenblatt downgrades Google stock amid rising turnaround risks
An analyst at Rosenblatt downgraded Alphabet (NASDAQ:) stock from buy to neutral, based on “multiple areas of transition risk that he recommends stepping back for a short period to see how the company handles them.”
The investment bank identified several risks facing the tech giant, including the impact of AI on search, which could negatively impact search ad revenue due to the introduction of AI. The analyst also noted emerging evidence of a loss of search share to Bing.
Moreover, the shift of search ad revenue to retail media networks is expected to accelerate, with retailers like Walmart (NYSE:) following in the footsteps of Amazon (NASDAQ:) in this area.
Another risk Rosenblatt highlighted was Amazon’s aggressive entry into video advertising, with ads going virtual on Prime Video this year and an aggressive upfront sales effort launched in May, which could impact ad sales dynamics on YouTube.
“We also see a risk that competitive dynamics could push Alphabet into a higher-than-expected AI capital spending cycle,” the analyst added.
Truist on Nvidia: “Number One can become Number One”
NVIDIA Corporation (NASDAQ:) recently became the number one company in terms of market valuation, and according to Truist Securities analysts, the company could go from number one to “number one.”
On June 18, Nvidia’s market cap reached $3.34 trillion, surpassing Microsoft (NASDAQ:) as the world’s most valuable public company. However, NVIDIA shares then fell over several sessions, causing it to lose the top spot.
“We considered that even if fundamentals cooperate, the stock’s upside may be limited due to trading and technical challenges related to NVDA’s No. 1 position in market cap,” Truist analysts noted.
However, Truist’s analysis suggests that achieving the highest market value does not necessarily impede future investment returns.
The company reviewed the investment returns and valuations of stocks that once had the highest market caps over the past 26 years, including Microsoft, Cisco (NASDAQ:), ExxonMobil (NYSE:), Apple, and Amazon.
The results showed that most of these stocks underperformed the S&P 500 over short periods of one week, one month and three months after reaching their peak market cap. However, over longer periods of one year, three years and five years, these stocks generally outperformed the S&P 500, Truist analysts noted.
Rosenblatt Raises Apple to 50%, Says Privacy-Focused AI Could Boost Market Share
Rosenblatt Securities upgraded shares of Apple Inc (NASDAQ:) to buy this week, citing the potential for the company’s privacy-focused Apple Intelligence platform to boost its market share in the artificial intelligence sector.
This decision comes on the heels of a survey conducted by Rosenblatt, which revealed that privacy is the most desired feature among American consumers in the field of artificial intelligence technology.
The survey, which received more than 500 responses, used the MaxDiff ranking system to evaluate 15 key AI features in early smartphones. Privacy emerged as the top priority, with 17.8% of responses positive, outpacing the next-highest-ranking feature, Insight, by 5.6 percentage points.
“Because Apple has uniquely identified private cloud computing as the core of its approach, based on a recent history of stronger ad privacy safeguards in its App Store and in contrast to AI privacy incidents from competitors, Apple appears positioned to gain interest.” brand and AI market share through its direct focus on strong privacy,” the analysts wrote.
Rosenblatt also highlighted Apple’s strategic focus on large, specialized language models (LLMs) and Apple’s own silicon chips, which appear to protect the company from the cost pressures affecting other tech giants.
Analysts Raise Price Targets on Micron Despite Earnings Drop
Shares of AI memory chip maker Micron Technology Inc (NASDAQ:) fell after it released its latest quarterly results on Wednesday.
Citi analysts attributed the decline to the company’s conservative guidance and increased capital spending. However, they maintained a positive outlook, noting that investors should “buy MU on weakness as the DRAM rally thesis remains intact and we expect sequential upside in revenue, earnings per share and gross margins to C25.”
Reflecting this view, Citi reiterated a buy rating with a $175 price target on Micron shares, raising its fiscal 2024 earnings per share estimate from $0.52 to $0.66.
JPMorgan analysts echoed the sentiment, expressing confidence in Micron’s ability to capitalize on demand for AI-driven memory content and accelerated computing server deployments. They noted that the company’s HBM3e capacity is sold out through 2025 and starts seeing demand by 2026.
“Gross margins for both HBM3e and eSSD are positive for their respective segments, and we believe this should strengthen their profitability structure in conjunction with cyclical demand/supply related price increases,” JPMorgan analysts wrote.
“We believe the stock should continue to outperform through 2024 and into 2025 as the market continues to discount improved revenue/margin/earnings power.”
JPMorgan Chase reiterated its rating on Micron stock as Overweight, set a December 2025 price target of $180, and highlighted MU as “one of our top semifinal picks next year.”
Stifel Starts Tesla Buyout, Sees Strong Potential in AI-Based FSD
Earlier this week, analysts at investment bank Stifel initiated research coverage of Tesla Inc (NASDAQ:) with a Buy rating and a price target of $265.00.
They believe Tesla is well positioned for significant growth over the next few years, especially from 2025 to 2027. In the near term, the updated Model 3 and the upcoming updated Model Y are expected to boost sales. Moreover, production of the next generation Model 2 is expected to attract high demand.
“We also believe TSLA’s AI-based Full Self-Driving (FSD) initiative has the potential to generate significant value through FSD sales, potential licensing agreements, and as a critical driver for long-term RoboTaxi initiatives,” Stifel analysts wrote.
However, they also highlighted some near-term risks, including delivery levels following disappointing first-quarter 2024 results, challenges in electric vehicle adoption, and uncertainties related to the US election.
