Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Bank of America on Nvidia: ‘Compelling Growth at a Compelling Valuation’
Bank of America this week reiterated its buy rating on NVIDIA Corporation (NASDAQ: NVIDIA) stock, highlighting its “strong growth at a compelling valuation.”
Despite some short-term headwinds, Bank of America analysts see these challenges as an attractive buying opportunity.
Nvidia is currently facing delays in its Blackwell production line, potential regulatory scrutiny from the Justice Department’s antitrust investigation, and broader market issues like poor seasonality and interest rate concerns. However, Bank of America believes these factors could boost the stock’s buy potential, especially given its valuation.
The stock is trading at about 27 times its 2025 forward price-to-earnings ratio, putting it in the lower quartile of its five-year range, which Bank of America sees as a favorable entry point.
Despite the delay caused by Blackwell, Bank of America emphasizes Nvidia’s continued growth, driven by demand for its previous-generation Hopper chips. The bank also notes that Nvidia’s AI products have “consistently outperformed industry benchmarks,” suggesting the company’s dominance in AI is unlikely to wane.
Bank of America is particularly bullish on Nvidia’s role in the next generation of large language models (LLMs), including OpenAI’s GPT-5 and Meta’s Llama 4, which are expected to deliver significant advances in AI capabilities.
“AI capital not only drives new business opportunities, but is also critical to protecting existing moats and large revenue streams in search, social media, and enterprise (chat, assistant),” the Bank of America team adds.
The firm views Nvidia as a top pick in the technology sector, with supply chain updates in the coming weeks likely to act as a major catalyst for the stock’s recovery.
Microsoft and Adobe added to WF’s ‘Signature Pick’ collection
Wells Fargo has added Microsoft Corp (NASDAQ:MSFT) and Adobe Systems Incorporated (NASDAQ:AVG) shares to its “Premium Picks” portfolio.
Analysts disclosed in a note on Wednesday that they had opened a 4% stake in Microsoft, citing the company’s “cloud position and (AI) leadership.”
They stressed that artificial intelligence was a major factor in driving the strength of Microsoft’s Azure cloud division in the second half.
Analysts also initiated a 2% investment in Adobe, noting that “design is one of the most tangible use cases” for generative AI.
They added that concerns about competition in this area are “overblown” and stressed that “Adobe’s moat remains strong.”
AI Stocks Are Not in a Bubble, But Concentration Risks Are High
In a note released Thursday, Goldman Sachs strategists dismissed concerns that the AI sector is in a bubble, though they warned that concentration risks remain high due to the dominance of a few large-cap companies.
Since 2010, the technology sector has accounted for 32% of global equity performance, driven by strong fundamentals and the introduction of transformative technologies such as artificial intelligence. Despite the rapid rise in valuations, Goldman believes that AI “is likely to continue to dominate returns,” rather than signaling a bubble.
The report identifies the “Super Seven” — major US tech companies like Apple (NASDAQ: ), Microsoft, and Nvidia — that now have a significant share of the market.
These companies, backed by strong earnings and massive investments in artificial intelligence, show no signs of the irrational euphoria seen in past bubbles, such as the dot-com boom of the late 1990s. Their profitability and cash flows justify their valuations, which remain well below tech bubble levels.
However, Goldman warns that market concentration has reached historic levels, with the top 10 companies now accounting for more than a third of the index, while the top five companies account for 27% of the index’s total value.
Strategists are asking whether this AI-driven rally in tech stocks could be approaching bubble territory, or whether the concentration of power in the hands of a few companies is creating a “dangerous trap” for investors.
On the other hand, this focus may provide “an opportunity to diversify investments towards potential beneficiaries of these technologies through cheaper companies outside the dominant few,” the note added.
Mizuho Adds Micron, Oracle to Top Picks List
Mizuho analysts have added Micron Technology Inc. (NASDAQ:MIC) and Oracle Corporation (NYSE:ORC) to their Top Picks list, the investment bank’s pick of strong catalyst-driven ideas.
For Micron, a major player in the AI boom, analysts expect the company to benefit from better pricing in DRAM and NAND, while AI-related tailwinds boost its HBM market share. Micron’s partnership with NVIDIA, in particular, is expected to support these gains.
Mizuho expects HBM3E to capture about 70% of the HBM market by 2025, with Micron continuing to be a significant supplier of NVIDIA’s AI GPUs. This could lead to HBM share growth in the second half of 2024 and into 2025. Analysts also expect AI devices to require twice as much DRAM and NAND content as traditional devices by 2025.
Although Micron’s HBM yield issue weighed on margin expansion in Q2, Mizuho analysts believe margins could improve by 2025 as HBM accounts for a larger share of revenue and usage rates for DRAM and NAND rise.
“The corrections in most end-consumer markets are almost complete, but demand headwinds remain as refresh cycles for mobile phones and PCs appear to be extended compared to previous years,” the report noted.
Regarding Oracle, Mizuho Bank believes that the company’s cloud infrastructure (OCI) is undervalued.
Its competitive pricing, which is about 33% lower than AWS, positions Oracle to attract more enterprise customers as they move from on-premises to cloud solutions. Analysts expect Oracle’s strong on-premises customer base to be a major revenue driver.
Furthermore, they are confident that Oracle will be able to expand its operating margins to 45% by FY26 through “expanding cloud margins, sales and R&D efficiencies, and leveraging scale.”
SMCI Stock Downgraded at JPMorgan on Regulatory Uncertainty, Competitive Pressures
Analysts at JPMorgan downgraded Super Micro Computer Inc. (NASDAQ:SM) from “overweight” to “neutral” on Friday, with the company’s shares down more than 3% after the market opened.
Analysts stressed that while they remain confident in Super Micro’s ability to restore regulatory compliance, near-term uncertainty is a key factor in changing the rating.
“The short-term outlook suggests there is no clear basis for new investors to enter SMCI shares while uncertainty around restoring regulatory compliance is of paramount importance beyond unchanged business fundamentals,” they explained.
JPMorgan also expressed concerns about the company’s potential response to competitive pressures in the AI server market. Analysts noted that aggressive pricing to retain customers could weigh on margins, potentially prompting a competitive response from peers.
The company believes that while meeting regulatory requirements could serve as a positive catalyst, investors will likely wait for clearer signals that customer demand and margin expectations remain stable before fully committing.
In light of these doubts, JPMorgan Chase advises new investors to hold off on taking positions until the company regains compliance with regulators.
The company also lowered its December 2025 price target from $950 to $500, reflecting a lower earnings multiple that is more in line with traditional IT hardware companies, which typically see slower growth.
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