Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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New Street upgrades Nvidia to buy, says recent pullback presents opportunity to add more exposure
New Street Research raised Nvidia Corp. (NASDAQ: ) to a buy rating with a $120 price target this week. The move follows a sharp decline in the chipmaker’s stock since its June peak, which has pushed Nvidia to underperform other semiconductor stocks tied to data center intelligence.
“We see the correction as healthy overall, and acknowledge some limited and tactical headwinds specific to Nvidia, but overall we see the stock’s moves as an opportunity to gain more exposure,” the analysts said.
Nvidia’s recent drop in shares is partly due to reports of a potential three-month delay in the launch of its Blackwell chip due to design flaws. That delay could push volume shipments back to the first quarter of 2025.
Blackwell’s design involves two large dies connected together at 10Tbps using TSMC’s CoWoS-L packaging technology, which has faced challenges in scaling up production and may require a redesign.
To address this delay, Nvidia may extend the lifecycle of its Hopper chip, which uses more mature CoWoS-S packages and can be produced more efficiently. Nvidia may also offer a simplified version of its Blackwell chip with a single die, according to New Street.
“While its performance will be lower than that of the Blackwell dual-die SKUs, it will still represent an improvement over the Hopper,” the analysts noted.
New Street also maintains a positive outlook on Nvidia’s dominance of the data center XPU market.
“We see internal XPUs performing well against GPUs and being deployed in the millions across the giant internal captive markets,” although they acknowledge AMD (NASDAQ:) as a potential competitor.
Furthermore, the forecast for capital spending for large computing companies has increased in 2025, where it is now expected to grow by 13%, with capital spending for AI infrastructure expected to grow by at least 30%. This supports the company’s projection that spending on semiconductors for AI could increase by 50% annually.
‘Distant Third in AI for Traders’: Mizuho Downgrades Intel Shares
Analysts at Mizuho Bank on Wednesday downgraded Intel (NASDAQ:) stock from outperform to neutral and revised their price target to $22 from $36.
The investment bank had upgraded Intel in November 2023, driven by expectations of strong momentum in artificial intelligence and new products that would boost the appeal of personal computers and data centers. However, nine months later, the outlook has changed.
“We were wrong – INTC continues to lag peers and lose share in all major AI/data center/PC markets through 2025,” the analysts wrote. “We see continued headwinds for INTC, with execution risks to its product portfolio, and we downgrade INTC to Neutral.”
The technology gap between Intel and its competitors has widened, and while there is long-term potential for tailwinds for factories and 18A, regaining lost leadership is likely to be difficult, Mizuho notes.
Despite new product launches in servers (Sierra Forest/Granite Rapids), AI (Gaudi 3), and PCs (Meteor Lake), Intel is losing market share in PCs and data centers, and remains “a distant third in AI for merchants.” Mizuho also cited internal challenges, including headcount reductions that could impact morale and execution.
Analysts noted that the decision to cut dividends had an additional impact on investor sentiment towards the stock.
Bank of America Downgrades SMCI to Neutral Amid Margin Headwinds
Earlier in the week, Bank of America analysts downgraded Super Micro Computer (NASDAQ:SM) stock from buy to neutral after the company reported worse-than-expected margins for its fiscal fourth quarter.
Although Q4 revenue was in line with company and market estimates, gross margin of 11.3% was significantly lower than the expected 13.6%.
SMCI stock fell 20% on Wednesday.
The data center company’s first-quarter fiscal 2025 revenue guidance beat expectations, and its full-year fiscal 2025 revenue forecast of $28 billion topped the consensus estimate of $23.8 billion.
However, Bank of America noted that Super Micro’s gross margin is expected to gradually return to its typical range of 14% to 17% by the end of fiscal 2025, assuming improved manufacturing efficiencies, better customer mix, and new platform launches.
“While the long-term benefit of AI remains intact, we are moving to a Neutral rating, from a Buy, as we see remaining margin over the next several quarters being challenged as SMCI navigates a competitive pricing environment, delayed shipments of Blackwell GPU systems that require liquid-cooled racks (higher margin), and ongoing issues with component availability.”
Reflecting these headwinds, they also lowered their price target on Super Micro Computer stock from $1,090 to $700, in line with the broader sector trend where valuation multiples have seen a significant decline.
Wedbush: Palantir, Microsoft Collaboration a ‘Launchpad for AIP Story’
Palantir (NYSE:) and Microsoft Corporation (NASDAQ:) announced a partnership this week to develop an integrated technology suite designed for the U.S. defense and intelligence community.
This collaboration will leverage Palantir’s AI-powered platforms within Microsoft’s government and classified clouds, enabling secure cloud, AI, and analytics capabilities.
As part of the agreement, Palantir will deploy its full suite of products, including Foundry, Gotham, Apollo, and AIP, on Microsoft’s cloud platforms. This will allow government agencies to build AI tools for operational and logistical purposes, while providing hands-on experience to test the technology.
Palantir will also integrate Microsoft’s Azure OpenAI service into secure environments, combining cloud computing and advanced language models to support AI-powered operations in defense and intelligence.
“With this mega deal bolstered and MSFT leveraging PLTR’s AI and LLM capabilities for the U.S. government, the company can now accelerate the pace of AI implementation as PLTR continues to accelerate AIP adoption within the federal sector,” Wedbush analysts commented.
“We believe this will serve as a launching pad for the PLTR AIP story to reach the Department of Defense and the broader Washington, D.C., ecosystem over the next 12 to 18 months,” they added.
Citi confirms Micron as top pick amid strong DRAM outlook
Semiconductor stocks have been on a sharp decline recently, driven by macroeconomic challenges and disappointing earnings that fell short of high expectations. The decline was linked to slower-than-expected replenishment of analog inventories and potential risks from the automotive sector, which accounts for 14% of semiconductor demand.
However, analysts at Citi remain bullish on the sector, stressing that “the main reasons we are bullish – AI and memory power – remain intact.”
Despite the recent decline, Citi still favors Micron Technology (NASDAQ:) as the industry’s top pick. The company believes that “now is the time to double down as DRAM prices are expected to continue to rise amid lower capacity and better-than-expected DRAM prices in Q3 2024.”
The DRAM market is showing signs of improvement, with strong performance from major players such as Samsung (KS:) and SK Hynix.
Citi analysts have revised their DRAM price forecasts for 2024, now expecting a 62% year-over-year increase, up from their previous estimate of 53%. The revision is attributed to limited supply growth and memory makers’ shift toward high-bandwidth memory (HBM).
Despite weaknesses in the automotive and industrial sectors, demand from the largest end markets—personal computers, mobile phones, and servers, which together account for 61% of semiconductor demand—remains relatively strong.
Micron reported that inventory levels in the traditional data center market improved during the first half of 2024 and expects further growth in the second half.
Citi analysts also noted that they “expect guidance to rise when Micron reports earnings in September.”
Micron shares have fallen more than 30% over the past month.