Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Nvidia Share Buyback Declines – UBS, BofA
Wall Street analysts are urging investors to take advantage of the recent pullback in Nvidia (NASDAQ:) shares. Although the AI giant’s fourth-quarter outlook fell short of the lofty expectations set by investors who have driven a massive rally in its stock on hopes of generative AI, analysts remain bullish.
Nvidia shares fell more than 6% on Thursday after the company reported strong second-quarter earnings. While the company reported strong growth and earnings, the results were mixed, with revenue and gross margin expectations falling short of Wall Street’s lofty targets as they have in previous quarters.
However, UBS analysts believe investors should “buy the dip,” noting that Nvidia’s key indicators remain bullish. The bank specifically pointed to the rise in purchase commitments and supply commitments from Nvidia, calling it “the most important metric we watch and a harbinger of future growth.”
UBS analysts also expressed confidence in Nvidia’s margins, noting that they are not concerned about gross margins and expect data center margins to remain flat during the Blackwell cycle, mirroring the stability seen during the Hopper cycle.
Similarly, Bank of America analysts reiterated their buy rating on Nvidia stock following the report and raised their price target from $150 to $165.
Bank of America acknowledged that the stock is “likely to be volatile” in the near term due to Nvidia’s forecasts failing to meet high expectations, and noted that higher Blackwell ramp costs could weigh on third-quarter margins.
However, Bank of America remains confident in Nvidia’s long-term prospects, stating that they “continue to believe in Nvidia’s unique growth opportunity, execution, and dominant share of over 80% as generative AI deployments are still in the first year to year and a half of their initial 3-4 year investment cycle.”
“AI deployment remains a vital necessity for global cloud and enterprise customers, and NVDA provides the best ready-to-use model.”
Citi Moves Apple to First Choice
Citi analysts have elevated Apple (NASDAQ:) to their “number one AI pick” for 2025, surpassing both Nvidia and Arista Networks The move comes as Apple prepares to unveil the iPhone 16 lineup at its “It’s Glowtime” product event on September 9.
Apple is expected to unveil several major updates during the event, including A18 chips using the N3E process with an improved Neural Engine, improved camera and microphone features, and an upgraded modem for the Pro models.
“Apple’s September event is generally about hardware updates, but we think the company will focus a lot on how the hardware updates for the iPhone 16 family will better support the Apple Intelligence features that are expected to be officially rolled out later in the fall,” analysts at Citi said.
Looking ahead, Citi expects a major update with the launch of the iPhone 17 next year, with AI features being rolled out gradually over the next year. This gradual rollout is expected to give developers time to build apps and allow Apple to build customer recognition.
Citi expects iPhone 16 and iPhone 17 sales to reach 85 million and 92 million units in 2024 and 2025, respectively. Total iPhone units are expected to reach 228 million units in 2024 and 241 million units in 2025.
Analysts also noted that “AAPL stock has outperformed the broader market on average since 2016 by 5%-6% over the period from its June Q1 earnings date to the iPhone release date in September.”
AI Bubble Burst Raises More Concerns Than Recession – BCA Research
Investors should be more concerned about a potential AI bubble burst than an impending U.S. or global recession, according to strategists at BCA Research. The firm’s analysis suggests that the risks associated with the fast-growing AI sector are more severe than those posed by broader economic downturns.
“When bubbles burst, the investment priority is to avoid the bubble that bursts and the sectors, regions and countries that are most exposed to it.” This means that regardless of whether a recession follows the collapse of the bubble or not, the primary focus should be on avoiding the areas most affected by the fallout.
In line with this, BCA Research advises investors to under-invest in US technology and near-tech sectors, which are closely linked to the AI boom, and reduce their exposure to US equities within a global portfolio.
“Investors should be much less worried about a recession in the US or the world than about a bubble in anything related to artificial intelligence,” BCA noted.
As the AI sector continues to attract significant attention and capital, BCA warns that the potential for a sharp correction is a noteworthy threat.
William Blair Initiates Tesla Coverage With Buy Rating
William Blair Research initiated coverage of Tesla (NASDAQ:) with an Outperform (Buy) rating, driven primarily by the underappreciated potential of Tesla’s energy storage business.
The company believes that Tesla Energy, particularly its Megapack and Powerwall products, could become a major growth engine, especially as the outlook for the electric vehicle segment slows in the near term.
“We view Tesla Energy as the most underrated component of the Tesla story and expect the narrative to shift toward the energy storage business given the benign near-term EV outlook.”
Analysts highlighted three key factors that make Tesla’s energy storage business a compelling investment: the need for grid stability, data center expansion, and the integration of renewable energy sources.
These aspects, combined with Tesla’s broader automotive business and emerging opportunities in artificial intelligence, robotics and taxis, position the company as a technology leader with what William Blair has described as an “Apple-like ecosystem for the future of energy.”
“Energy is the basis of life, and its abundance or lack determines how well a society can reach Maslow’s hierarchy of needs.”
Tesla’s approach to energy, through more efficient electric vehicles, energy storage solutions, and innovations like robotic taxis and humanoid robots, aims to revolutionize how energy is created, stored, and used, with broad societal implications.
While Tesla’s current valuation may seem high by conventional measures, William Blair argues that this additional value is justified.
“Using traditional comparative analysis in the automotive or even technology space, we understand the difficulty of justifying the valuation, but in our view, this misunderstands the Tesla story.”
They believe the halo effect created by Elon Musk, the company’s first-principles culture, and its technological advantages are worth the valuation premium.
Citi Opens Positive Catalyst Watch on Marvel Stock
Citi analysts maintained a Buy rating on Marvell (NASDAQ:) stock with a $91 price target, based on 18% above-consensus earnings per share (EPS) in fiscal 2025 after July Q3 results.
The investment bank sees Marvell benefiting from strong AI investments to rapidly expand its AI ASIC business, with four AI ASIC projects in the pipeline – two currently underway, one expected to be implemented in 2025, and the other in 2026.
Furthermore, Citi is adding a positive catalyst ahead of next week’s tech conference, where Marvel CEO Matt Murphy will participate in a friendly chat.
“We expect management to be bullish on AI growth beyond previous AI sales targets in 2024/25 and the recovery of all non-AI end markets in 2H24,” the analysts wrote.
“MRVL stock typically outperforms when all of its end markets move in the same direction,” they added.
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