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Written by Louis Jurich and Sarina Isaac
Investing.com – Here’s your weekly Pro round-up of this week’s top tech headlines: potential new US regulations on artificial intelligence; concerns about Micron; a steady stream of Tesla downgrades after a frantic race; Apple closes above $3 trillion.
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The US government is considering new regulations on artificial intelligence: report
Shares of AI chips Nvidia (NASDAQ:) and Advanced Micro Devices (NASDAQ::) fell on Wednesday after a Wall Street Journal report said the Biden administration is considering new restrictions on the export of artificial intelligence (AI) chips to China.
The move stems from growing concerns surrounding the potential dominance of this technology by enemies of the United States.
The report added that the Commerce Department may take a step to halt shipments of artificial intelligence chips made by Nvidia and other chipmakers to customers in China as early as July. The ban would include the sale of A800 chips from Nvidia without a license.
Despite the recent news, Citi analysts believe demand for AI will outpace supply this year and Nvidia could move its chips around. They maintain a Buy rating on the stock.
Over the course of the week, Nvidia fell partially to $423.02, while AMD rose 2.4% to $113.91.
Micron is excelling, but investors still worry about China risks
Micron Financial (NASDAQ:) performed better than expected, but concerns remained about market share risks in China.
Shares lost 4% on Thursday and continued to slide into Friday’s close.
The chip maker said the bottom was in memory chip revenue, reporting an adjusted loss of $1.43 per share on revenue of $3.75 billion. Analysts polled by Investing.com expected a loss of $1.59 per share on revenue of $3.67 billion.
However, the chip maker warned that China’s cyberspace administration’s recent decision was a “significant headwind” affecting its outlook and slowing its recovery.
However, Wall Street analysts reflected positively on Micron’s results and outlook. City said that while the results were “ugly”, which was to be expected, several indicators indicated that a recovery is on the way.
“We continue to believe that the worst of the memory cycle is behind us and recovery is on the horizon,” they said in a note.
Piper Sandler analysts upgraded the rating to Neutral with a price target of $70 per share “based primarily on improving end market stock conditions with potential improvement in volumes and pricing in the second half of ’23.”
Multiple analysts cut Tesla to neutral
After a strong run for Tesla (NASDAQ:) shares last month, the stock has been hit by a series of valuation-based downgrades over the past two weeks, including downgrades to equivalent ratings at Goldman Sachs, Morgan Stanley and Barclays.
Since its lowest point in late April, Tesla stock is up about 70% versus an 8% rally in .
Goldman cut the shares to neutral from buying, though analysts still raised the price target to $248 per share from $185 previously, reflecting higher EPS estimates and a higher multiple target. He explained:
Overall, we believe Tesla is well positioned for long-term growth, given its leading position in the electric vehicle and clean energy markets (which we partly attribute to its ability to offer complete solutions including charging, storage, software/FSD, and services with a direct selling model), now reflected in the form of better in stock.
While the downgrade move was mostly driven by valuation, Goldman also highlighted a “challenging pricing environment for new cars,” which it believes will hurt Tesla’s non-GAAP gross margin in 2023.
Overall, Goldman “remains positive about EV adoption, and we continue to see the most investment opportunities among our broader group of suppliers, particularly those with higher content to enable the transition to EVs and electrification.”
For its part, Barclays downgraded the stock to Equal Weight from Overweight, saying it believes the recent sharp rally in shares ignores questions about near-term fundamentals.
While Tesla stock movements tend to be driven by more than fundamentals at times, Barclays analysts say they’re wary of jumping on the bandwagon. They believe the rally is mostly driven by investors’ renewed love for tech stocks, as well as excitement over recent announcements that Tesla will open its Supercharger network to other brands:
The relative indifference to the challenges to TSLA’s near-term fundamentals amid the sharp rally is our primary concern with the stock, and at the heart of our downgrade to EW’s rating. We see a number of underlying weaknesses in TSLA’s narrative in the near term.
However, he added that it’s still bullish over the long term:
To be clear, we see a significant long-term opportunity for TSLA — a view that strengthened our previous Overweight rating. We still see TSLA as the long-term winner among OEMs in the race to the EV realm, with a “strong balance between the two watches.”
This is in addition to the market’s view of Elon Musk as “more than just an automaker.” However, analysts believe that the market is ignoring fundamental challenges in the near term.
Morgan Stanley cut Tesla stock to Equalweight from Overweight with a price target of $250, up from $200, citing the stock’s “relatively full valuation and more balanced risk reward and highlighting the key drivers and investor discussions for the stock at this level.”
Tesla shares are up 122.8% year to date.
Apple closes above $3 trillion for the first time
Shares of Apple (NASDAQ:) closed above a $3 trillion market cap on Friday — the first time any company has done so.
The latest bullish push in Apple shares comes after Citi analysts initiated research coverage with a buy rating and a high share price target of $240 per share. And they see more upside potential in Apple stock despite up 47% year-to-date.
“Apple is riding out the overall slowdown and inflationary pressure on consumer spending by consistently gaining share of Android phones, and we see a potential increase of approximately 30% from current levels,” the analysts said in a note to clients.
They also argue that the market diminishes gross profit margin continues to expand. This factor is one of the main underpinnings of analysts’ bullish attitude toward Apple, as well as the mix of growing services sales and a strong balance sheet.
Apple shares briefly traded above the $3 trillion mark in early 2022, but failed to close above it.
Sinad Karahmetović and Yasin Ibrahim contributed to this report.