Investing.com – Here are the top moves by analysts in the artificial intelligence (ai) space this week.
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UBS downgrades Tesla (NASDAQ:) to “Sell” on valuation reassessment and high ai costs
On Friday, UBS analysts downgraded Tesla stock from Neutral to Sell, while raising the price target from $147 to $197.
This adjustment is intended to reflect a reassessment of Tesla's valuation amid market expectations about its growth, particularly in ai.
UBS acknowledged Tesla's diversification beyond car manufacturing, citing positive developments in its Energy and Full Self-Driving (FSD) segments as supporting factors.
Analysts caution, however, that expectations for Tesla's core auto business are declining. They note that Tesla's valuation has historically included a premium for its potential growth in several areas. Still, the challenge lies in accurately valuing this “optionality.”
Recently, Tesla's premium has expanded due to the growing enthusiasm around ai. After evaluating Tesla's various segments, 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 reach a future value of $1 trillion within five years, and even higher to support a Buy rating, analysts said.
They also expressed concerns about the high costs of ai investments, the unpredictable pace of improvements 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.
With the stock trading at 86 times forward 12-month (NTM) P/E, the lack of visibility and potential for delayed growth opportunities justified the downgrade to Sell, UBS said.
BofA Raises Apple (NASDAQ:) Price Target on ai-Driven iPhone Upgrade Cycle
Bank of America raised its price target on Apple to $256, from $230, in a note to clients Thursday, citing increased confidence in a multi-year iPhone upgrade cycle.
The increase is driven by a global smartphone survey and an analysis of Apple's aging installed base, indicating strong upside potential.
“We are increasing our Apple Buy offer to $256 due to increased confidence in a multi-year iPhone upgrade cycle driven by an aging installed base and GenAI features that should provide a boost to customer intentions to upgrade,” the analysts wrote in a note.
The survey, conducted in the US, UK, China and India, found that a large portion 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 World Developers Conference (WWDC) has increased customer intentions to upgrade in 2024. This is further supported by strong services growth and margin expansion, prompting BofA to reiterate a positive outlook on AAPL.
Nomura downgrades SMCI amid 'limited share price upside'
Earlier this week, research analysts at Nomura downgraded Super Micro Computer (NASDAQ:) 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 shifted from 'easy to beat low market expectations' in Q4 2023 to 'less room to beat already high market expectations,'” the analysts said.
Nomura's revised outlook is due to uncertainties surrounding the gradual easing of CoWoS-S supply 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 gross profit margins, analysts said limited order visibility amid these uncertainties could make it difficult to beat sales expectations “and therefore this could be a mixed bag, in our view,” the Nomura team added.
The company expects the ai server maker's June quarterly sales to be in line with its guidance of $5.1 billion to $5.5 billion, and noted that some liquid cooling projects have been delayed to later quarters, reducing the likelihood of beating guidance.
Nomura analysts also believe that Supermicro’s near- and medium-term outlook remains uncertain due to potential uncertainties in ai server orders. This is due to new procurement decisions by major customers and the transition between Nvidia’s Hopper and Blackwell GPUs, which may impact SMCI as customers lean towards adopting Blackwell GPU solutions.
Microsoft (NASDAQ:) remains a leader in GenAI – Morgan Stanley
Morgan Stanley analysts said Microsoft remains a strong leader in GenAI, citing a recent Q2 2024 CIO survey.
Survey data shows that Microsoft’s leadership in GenAI is driving significant incremental gains in IT engagement.
“Microsoft's leadership in terms of core spending intentions and positioning in GenAI is improving most significantly,” the analysts said in a note.
Microsoft's core spending growth expectations rose to 6.6%, the highest level since Q2 2021. This increase is largely due to Microsoft's strong presence in GenAI functionality and its Azure Cloud business.
CIOs are particularly optimistic about Microsoft’s GenAI 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 CIOs planning to use it, followed by Azure OpenAI Services at 41%.
Keybanc Raises Prices for ai Chipmakers as ai Boom Continues
KeyBanc Capital Markets raised price targets for several major chipmakers, reiterating strong demand for ai products.
KeyBanc highlighted a significant recovery in demand for traditional servers, driven primarily by major US 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 sector.
“For 2024, we are increasing our total server shipment estimates to +7% from +4% previously, with +5% for Enterprise and +8% for Cloud,” the analysts said. They also project ai servers to grow 150% to approximately 450,000 units in 2024.
As for Nvidia’s GB200, KeyBanc believes the NVL72 configuration will dominate demand in 2025 over NVL36. NVL72 offers 20-30x the performance of H100 and provides the lowest cost-per-token solution. As such, they expect GB200 to generate over $200 billion in data center revenue for the chipmaker by 2025.
KeyBanc has revised its target prices for several leading chip stocks, including NVDA, to $180 from $130. Monolithic power (NASDAQ:) from $850 to $975, Cirrus Logic (NASDAQ:) from $120 to $155 and Marvell (NASDAQ:) technology from $90 to $95.
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