Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Concerns over Nvidia Blackwell delays ‘overdone,’ says Evercore
Evercore ISI analysts recommend buying Nvidia (NASDAQ:NVDA) stock ahead of the chipmaker’s upcoming earnings report for the July quarter, saying that recent worries about potential delays in the release of the Blackwell system are “overdone.”
The investment bank emphasizes that demand for Nvidia's systems remains strong, as highlighted by a 20% quarter-on-quarter increase in hyperscale capital expenditure (CapEx) during Q2 2024. Looking forward, CapEx is anticipated to grow by an additional 8% in Q3 and 10% in Q4.
Earlier reports indicated that Nvidia’s much-anticipated Blackwell system, which features its next-generation AI chips, might face delays of up to three months. This news sparked investor concerns over the sustainability of Nvidia's stock rally.
Evercore analysts reviewed past Nvidia product disruptions in 2008, 2022, and 2023, concluding that while a negative announcement could result in a short-term stock drop of 5%-10%, Nvidia has consistently shown resilience in quickly developing alternative solutions.
“Furthermore, should a delay manifest, we believe demand is so strong, particularly at Tier 2 and 3 CSPs (Cloud Service Providers) and enterprises, that current generation Hopper solutions would be purchased even if Blackwell was pushed,” the analysts remarked.
Evercore continues to view Nvidia as its “Top Tectonic Shift in Computing pick,” asserting that the company is well-positioned to capture up to 80% of the value in the parallel processing era. Analysts also project that Nvidia could achieve more than $10 in earnings per share (EPS) by 2030 “and that it could ultimately grow to be 10-15% weighting of the S&P 500 Index.”
They have raised their estimates for Nvidia’s third-quarter and 2024 performance, along with increasing its target price for the stock from $145 to $150.
MoffettNathanson: Apple’s AI potential is already priced in
Apple (NASDAQ:AAPL) is positioned to be a significant player in the AI space, but this potential is already factored into its stock price, MoffettNathanson said in a note to clients.
The firm, which initiated coverage of Apple with a Neutral rating and set a price target of $211 per share, acknowledged Apple's strong AI strategy but noted that the market has already anticipated and priced in these developments.
"Apple is poised to win in AI," MoffettNathanson analysts said, but cautioned that "that's exactly what's already priced in."
They observed that despite earlier concerns about Apple lagging in AI, the market has consistently shown confidence in the company's strategy. This was particularly evident after the World Wide Developers Conference (WWDC), where Apple confirmed much of its AI plans.
"By the time of their June WWDC, the broad strokes of Apple's 'contextual awareness' AI strategy were already well-anticipated by the tech intelligentsia, and hence by the market as well," the note states.
MoffettNathanson emphasized that Apple's AI approach leverages the trust of its over one billion users, especially in handling personal data like contacts and emails, which remain exclusively under Apple's control.
The firm also said that Apple's strategy is likely to drive an iPhone upgrade cycle, but the potential impact of this cycle is already reflected in the current stock valuation.
"Apple’s new AI functionality would be presented in service of driving an iPhone upgrade cycle – Apple is, after all, still primarily a hardware provider – as capitalizing on resident inference capabilities would require at least 8 GB of RAM and a neural processor that phones older than the iPhone 15 Pro don’t have," they explained.
Edward Jones initiates AMD stock coverage
Earlier in the week, analysts at Edward Jones initiated research coverage of Advanced Micro Devices (NASDAQ:AMD) with a Buy rating and added the semiconductor giant to its Stock Focus List.
The firm sees multiple catalysts that could drive significant growth for AMD in the coming years.
A key factor behind Edward Jones' optimistic outlook is the rising demand for data center infrastructure, which is expected to propel sales of AMD's graphics processing units (GPUs) and central processing units (CPUs).
The analysts highlighted that "growing demand for data center infrastructure should help drive accelerating sales" of these critical products.
Another driver of Edward Jones' bullish stance is AMD's acquisition of Xilinx (NASDAQ:XLNX).
"While the acquisition of Xilinx adds new programmable chip products and end-markets to AMD's business, we believe the company remains in the early innings of cross-selling and integrating Xilinx and AMD products," the firm stated.
The integration of Xilinx’s programmable chip products with AMD’s existing offerings is still in its early stages, but Edward Jones sees significant potential for cross-selling opportunities, which management estimates could be worth as much as $10 billion.
In addition, the firm points to the potential for a prolonged upgrade cycle in the PC market driven by AI-enabled PCs, which could further support AMD's growth.
Analysts believe that the positive outlook for AMD is "not fully reflected in the share price," presenting an attractive investment opportunity at current levels.
BofA double downgrades Silicon Motion to Sell
Shares of Silicon Motion Technology (NASDAQ:SIMO) fell Friday after Bank of America (NYSE:BAC) analysts issued a double downgrade on the NAND flash controller supplier.
They cut their rating on SIMO stock from Buy to Underperform, citing expectations of limited growth following the upturn in the first half of 2024.
Analysts pointed out that the company’s guidance for the second half already indicates minimal top-line growth compared to Q2 2024. Their updated analysis also suggests low growth in 2025 for sales, operating profit (OP), and earnings per share (EPS).
"A key reason is likely the low exposure to AI and enterprise SSD, areas more dominated by Samsung Electronics (KS:005930) and SK Hynix, respectively,” analysts wrote.
BofA has also reduced its EPS estimates for the second half of 2024 and 2025 by approximately 20%, driven by lower revenue and operating margin assumptions compared to their earlier forecasts.
The investment bank highlighted that SIMO’s revenue primarily comes from “controller IC chips” for NAND products, setting it apart from its competitor, Phison Electronics.
Given the expectation of limited growth beyond the first half of 2024, the analysts have lowered their price objective for SIMO to $60 from $90.
More broadly, BofA also noted that while demand for AI server chips remains strong, demand for commodity memory has significantly weakened.
Baidu downgraded at Bernstein on share pressure expectations
Bernstein analysts on Friday downgraded Baidu (NASDAQ:BIDU) from Outperform to Market Perform following the company's latest earnings report and cut their price target from $130 to $97.
The analysts foresee the stock trading sideways due to increasing disruption and reduced clarity on future prospects.
"We expect more disruption to the near-term Search results and any limited signs of success in next few quarters (that would have allowed investors to look through to the longer term)," they noted.
The firm also lowered its Search growth expectations by 5 percentage points for the second half of 2024 and by 3 percentage points for 2025, currently valuing the stock on a bearish outlook without factoring in any potential gains from AI Search initiatives.
"AI Cloud and Robotaxi are positive, but without Search showing a revival, we expect that shares will remain under pressure," Bernstein analysts added.