Investing.com – Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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UBS Downgrades Tesla (NASDAQ:) to Sell on Revaluation, Rising AI Costs
Analysts at UBS on Friday downgraded Tesla shares to sell from neutral, while raising their price target to $197 from $147.
The revision is intended to reflect a reassessment of Tesla’s valuation amid market expectations for its growth, particularly in the field of artificial intelligence.
UBS acknowledged Tesla’s diversification beyond car manufacturing, pointing to positive developments in the energy and fully autonomous driving (FSD) sectors as supportive factors.
However, analysts cautioned that expectations for Tesla’s core automotive business are declining. They noted that Tesla’s valuation has historically included a premium on its potential growth in various areas. However, the challenge is to accurately assess these “options.”
Recently, Tesla’s stock has been on the rise due to the growing enthusiasm for artificial intelligence. After evaluating Tesla’s various sectors, UBS concluded that the current share price implies a value of more than $500 billion for future growth initiatives.
To justify current stock levels, Tesla would need to achieve a future value of $1 trillion within five years, and even more than that to support a buy rating, according to analysts.
They also raised concerns about the high costs of AI investments, the unpredictable pace of improvement, and the long-term nature of potential returns. The company warned that if market enthusiasm for AI wanes, Tesla’s stock multiple could be negatively impacted.
The stock is trading at 86 times its forward price-to-earnings ratio for the next 12 months, so the lack of visibility and potential for delayed growth opportunities justify a downgrade to sell, UBS said.
Bank of America Raises Apple (NASDAQ:) Price Target on AI-Powered iPhone Upgrade Cycle
Bank of America raised its price target on Apple shares to $256, from $230, in a note to clients on Thursday, citing growing confidence in the multi-year iPhone upgrade cycle.
This rise is driven by a global smartphone survey and analysis of Apple’s legacy install base, which indicates strong upside potential.
“We raise our Apple rating to $256 on growing confidence in a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should boost customer upgrade intentions,” the analysts wrote in a note.
The survey, conducted in the US, UK, China and India, found that a significant percentage of iPhone users are still using older models: 29% own an iPhone 13, 13% own an iPhone 12, and more than 31% own an iPhone 11 or older.
The note also highlighted that the recent Worldwide Developers Conference (WWDC) increased customer intentions to upgrade in 2024. This is also supported by strong growth in services and margin expansion, prompting Bank of America to reiterate a positive outlook on AAPL.
Nomura Downgrades SMCI Amid ‘Limited Upside’
Earlier in the week, Nomura research analysts downgraded Super Micro Computer (NASDAQ:SMC) stock from Buy to Neutral due to “limited share price upside.”
“Following Supermicro’s strong guidance for Q4 2023 and Q1 2024, we believe Supermicro’s performance potential has changed from ‘easily beating low market expectations’ in Q4 2023 to ‘less room to beat already high market expectations,’” the analysts noted.
Nomura’s forecast revision comes due to uncertainty surrounding the gradual easing of CoWoS-S supplies in 2024 and the potential transition period between Nvidia’s Hopper and Blackwell GPUs in the second half of the year.
While SMCI’s advanced liquid cooling solutions provide a competitive advantage and support overall profit margins, analysts said limited demand visibility amid these uncertainties could make it difficult to beat sales expectations “so this could be a mixed bag, in our view,” the Nomura team added.
The company expects the smart server maker’s June quarter sales to be in line with its guidance of $5.1 billion to $5.5 billion, noting that some liquid cooling projects have been delayed to later quarters, reducing the likelihood of exceeding guidance.
Nomura analysts also believe that Supermicro’s near- to medium-term outlook remains uncertain due to potential uncertainty around AI server orders. This is due to new purchasing decisions by major customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which could impact SMCI as customers shift to Blackwell GPU solutions.
Microsoft (NASDAQ:) Still a Leader in GenAI – Morgan Stanley
Microsoft remains a strong leader in GenAI, Morgan Stanley analysts said, citing a CIO survey conducted in Q2 2024.
Survey data shows Microsoft’s leadership in GenAI is leading to significant additional gains in IT share.
“Microsoft’s lead in terms of core spending intentions and position in GenAI is improving more significantly,” the analysts said in a note.
Microsoft’s core spending growth forecast rose to 6.6%, the highest since Q2 2021. The increase is largely due to Microsoft’s strong presence in GenAI and Azure Cloud businesses.
CIOs are particularly bullish on Microsoft’s generative AI products. The survey reveals that 94% of CIOs plan to adopt Microsoft’s generative AI products in the next 12 months, up from 63% in Q4 2023 and 47% in Q2 2023.
Microsoft 365 Copilot is the preferred solution, with 68% of IT managers intending to use it, followed by Azure OpenAI Services at 41%.
Keybanc Raises Interest Rates on AI Chipmakers as AI Boom Continues
KeyBanc Capital Markets has raised its price targets on several major chipmakers, underscoring strong demand for AI products.
KeyBanc highlighted a significant recovery in demand for traditional servers, driven primarily by major U.S. cloud providers such as Meta (NASDAQ:) and Microsoft, along with sustained demand from Chinese cloud service providers (CSPs) and moderately improving demand within the enterprise segment.
“In 2024, we are increasing our overall server shipments estimate to +7% versus +4% previously, with Enterprise growing +5% and Cloud +8%,” the analysts said. They also expect AI servers to grow 150% to nearly 450,000 units in 2024.
Regarding Nvidia’s GB200 card, KeyBanc believes that the NVL72 configuration will dominate demand in 2025 compared to the NVL36 card. The NVL72 card offers 20 to 30 times greater performance than the H100 card and offers the lowest cost per token. As a result, the card maker expects the GB200 card to generate more than $200 billion in data center revenue by 2025.
KeyBanc revised its price targets on several leading chip stocks, including NVDA from $130 to $180, homogeneous force (NASDAQ:) from $850 to $975, Cirrus Logic (NASDAQ:) from $120 to $155, and Marvell (NASDAQ:) Technology from $90 to $95.
