Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Rosenblatt downgraded Google stock amid heightened turnaround risks
An analyst at Rosenblatt downgraded Alphabet (NASDAQ:) stock from buy to neutral, citing “multiple areas of transitional risk that I recommend holding 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 pointed to emerging evidence of a loss of search share to Bing.
Furthermore, the shift of search advertising revenues to retail media networks is expected to accelerate, as retailers such as Walmart (NYSE:) follow Amazon’s (NASDAQ:) lead in this space.
Another risk highlighted by Rosenblatt is Amazon’s aggressive entry into video advertising, with ads going default on Prime Video this year and an aggressive pre-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 by 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.
Truist analysts noted that they “considered that even if fundamentals cooperate, the stock’s upside may be limited due to commercial and technical challenges related to NVDA’s position in terms of market cap.”
However, Truist’s analysis suggests that achieving the highest market value does not necessarily hinder future investment returns.
The firm reviewed the investment returns and valuations of stocks that previously had the highest market capitalizations over the past 26 years, including Microsoft, Cisco (NASDAQ:), ExxonMobil (NYSE:), Apple and Amazon.
The results showed that most of these stocks underperformed compared to the S&P 500 over short periods of one week, one month and three months after reaching the top position in terms of market capitalization. However, over periods longer than one year, three years and five years, these stocks generally outperformed the S&P 500, Truist analysts noted.
Rosenblatt encourages Apple to buy, says privacy-focused AI could boost its market share
Rosenblatt Securities upgraded Apple Inc. (NASDAQ:) stock to buy this week, citing the potential of the company’s privacy-focused Apple Intelligence platform to boost 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 popular feature among American consumers in the field of artificial intelligence technology.
The survey, which drew more than 500 responses, used the MaxDiff rating system to evaluate 15 key early AI features for smartphones. Privacy emerged as the top priority, with 17.8% of positive responses, beating the next feature in the ranking, Insight, by 5.6 percentage points.
“Because Apple has uniquely positioned private cloud computing as the core of its approach, based on a recent history of stronger ad privacy guarantees in its App Store and in contrast to AI privacy incidents from competitors, Apple appears to be positioned to gain brand attention and AI market share through its direct focus on strong privacy,” the analysts wrote.
Rosenblatt also highlighted Apple’s strategic focus on specialized large language models (LLMs) and Apple Silicon, which appears to protect the company from cost pressures affecting other tech giants.
Analysts raise price targets for Micron despite lower earnings
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 bull 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 (EPS) estimate from $0.52 to $0.66.
JPMorgan analysts expressed similar sentiments, expressing confidence in Micron’s ability to capitalize on demand for memory content driven by artificial intelligence and the deployment of accelerated compute servers. They noted that the company’s HBM3e capacity was sold out through 2025 and started seeing demand by 2026.
“Gross margins for both HBM3e and eSSD are accretive to their segments, and we believe this should structurally increase their profitability along with cyclical price increases linked to supply and demand,” JPMorgan analysts wrote.
“We believe the stock should continue to outperform through 2024 and into 2025 as the market continues to ignore the improving revenue/margin/earnings power.”
JPMorgan reiterated an overweight rating on Micron stock, set a December 2025 price target of $180, and highlighted MU as “one of our top picks in next year’s semifinals.”
Stifel starts Tesla at Buy, 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 short term, the refreshed Model 3 and the upcoming Model Y update are expected to boost sales. Furthermore, the 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 after disappointing Q1 2024 results, challenges in electric vehicle adoption, and uncertainties surrounding the US election.
