Investing.com — Here are analysts’ biggest trends in the artificial intelligence (AI) space this week.
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Evercore says concerns over Nvidia Blackwell delays are ‘overblown’
Analysts at Evercore ISI have recommended buying shares of Nvidia (NASDAQ:) ahead of the chipmaker’s July-quarter earnings report, saying recent concerns about a possible delay in the release of Blackwell Systems are “overdone.”
The investment bank emphasized that demand for Nvidia’s systems remains strong, as evidenced by a 20% sequential increase in hyperscale capital expenditures (CapEx) for the second quarter of 2024. Going forward, CapEx is expected to grow a further 8% in the third quarter and 10% in the fourth quarter.
Previous reports had suggested that Nvidia’s long-awaited Blackwell system, featuring its next-generation AI chips, could face delays of up to three months, raising investor concerns about the sustainability of Nvidia’s stock price rally.
Evercore analysts looked at previous Nvidia product disruptions in 2008, 2022 and 2023 and concluded that while negative announcements could cause the stock to drop 5% to 10% in the short term, Nvidia has consistently demonstrated the resilience to quickly develop alternative solutions.
“Furthermore, if delays become evident, we believe there will be purchases of current-generation Hopper solutions even if Blackwell is pushed forward, as demand is very strong, particularly among tier 2 and tier 3 CSPs (cloud service providers) and enterprises,” the analysts said.
Evercore continues to view NVIDIA as “the biggest structural shift in computing,” arguing that the company is well-positioned to capture up to 80% of the value of the parallel processing era. The analysts also predict that NVIDIA can achieve more than $10 in earnings per share (EPS) by 2030 and “ultimately grow to account for 10-15% of the S&P 500 Index.”
They raised their third-quarter and 2024 earnings forecasts for Nvidia and increased their price target for the company’s shares to $150 from $145.
Moffett Nathanson: Apple’s AI potential is already priced in
MoffettNathanson said in a client note that Apple (NASDAQ:) is positioned to be a major player in AI, but that this potential is already priced into the stock price.
The firm initiated its coverage of Apple with a Neutral rating and set a price target of $211 per share, acknowledging Apple’s strong AI strategy but noting that the market has already anticipated and priced in these developments.
“Apple is poised to win in AI,” the MoffettNathanson analyst said, but cautioned that “it’s really already priced into that.”
They observed that despite previous concerns that Apple was lagging behind in AI, the market has consistently shown confidence in the company’s strategy, especially after the Worldwide Developers Conference (WWDC), where Apple unveiled many of its AI plans.
“At WWDC in June, the broad outlines of Apple’s ‘context-aware’ AI strategy were already well anticipated by the tech community and the market,” the memo read.
Moffett-Nathanson emphasized that Apple’s AI approach leverages the trust of more than a billion users, especially when it comes to handling personal data like contacts and email, which Apple controls exclusively.
The firm also said Apple’s strategy is likely to accelerate an iPhone replacement cycle, but the potential impact of this cycle is already factored into the stock’s current valuation.
“Apple’s new AI features will be offered to accelerate iPhone upgrade cycles — Apple is still primarily a hardware provider, after all — and to take advantage of resident inference capabilities, you’ll need at least 8GB of RAM and a neural processor, which phones older than the iPhone 15 Pro don’t have,” they explained.
Edward Jones begins trading AMD shares
Earlier this week, analysts at Edward Jones initiated research coverage on Advanced Micro Devices (NASDAQ:), assigning a Buy rating and adding the semiconductor giant to their watch list.
The firm sees several factors that could drive significant growth for AMD over the next few years.
The main factor behind Edward Jones’ optimistic outlook is growing demand for data center infrastructure, which is expected to boost AMD’s sales of graphics processing units (GPUs) and central processing units (CPUs).
“Rising demand for data center infrastructure should help accelerate sales of these key products,” the analysts stressed.
Another driver of Edward Jones’ bullish stance is AMD’s acquisition of Xilinx (NASDAQ:).
“The acquisition of Xilinx will add new programmable chip products and end markets to AMD’s business, but the company believes it is still in the early stages of cross-selling and integrating Xilinx and AMD products,” the company said.
While the integration of Xilinx’s programmable chip products with AMD’s existing products is still in the early stages, Edward Jones sees significant cross-selling opportunities, which management estimates could be as much as $10 billion.
The company also noted that the widespread adoption of AI-enabled PCs could lengthen the upgrade cycle in the PC market, which could further boost AMD’s growth.
Analysts believe AMD’s bright outlook “has not yet been fully reflected in its stock price,” making it an attractive investment opportunity at current levels.
BofA downgrades Silicon Motion to “sell”
Shares of NAND flash controller supplier Silicon Motion Technology (NASDAQ:) fell on Friday after analysts at Bank of America downgraded the company’s rating by two notches.
They downgraded SIMO shares to underperform from buy, citing their outlook for limited growth following the economic recovery in the first half of 2024.
Analysts noted that the company’s guidance for the second half of the year already indicates minimal revenue growth compared to the second quarter of 2024. Their latest analysis also suggests lower revenue, operating profit (OP) and earnings per share (EPS) growth in 2025.
“The main reason is likely due to its low exposure to AI and enterprise SSDs, areas where Samsung Electronics (KS:) and SK Hynix are strong, respectively,” the analysts wrote.
BofA also lowered its EPS forecasts for the second half of 2024 and the second half of 2025 by about 20% due to lower than previously anticipated revenue and operating profit assumptions.
The investment bank emphasized that SIMO’s revenue comes primarily from “controller IC chips” for NAND products, setting it apart from competitor Phison Electronics.
Analysts lowered their target price for SIMO to $60 from $90, citing expectations of limited growth after the first half of 2024.
More broadly, BofA noted that while demand for AI server chips remains strong, demand for commodity memory has weakened significantly.
Bernstein downgrades Baidu on stock price fall prediction
Bernstein analysts downgraded Baidu Inc. (NASDAQ:) to Market Perform from Outperform following the company’s latest earnings report on Friday, lowering their price target to $97 from $130.
Analysts expect stocks to remain flat due to growing turmoil and an uncertain future.
“We expect to see further disruptions in search engine performance in the near term, with limited signs of success over the next few quarters (which would allow investors to have a longer-term view),” they wrote.
The company also lowered its search business growth forecast for the second half of 2024 by 5 percentage points and by 3 percentage points for 2025, and is now valuing the stock with a bearish outlook, without factoring in potential gains from its AI search efforts.
“AI Cloud and Robotaxi are doing well, but unless Saatchi shows signs of recovery, we expect the stock to remain under pressure,” the Bernstein analysts added.
