Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today!
Analysts lift Nvidia PTs ahead of Blackwell launch
Piper Sandler analysts on Monday reaffirmed an Overweight rating for Nvidia (NASDAQ:NVDA) stock and raised their target price from $120 to $140 in a move driven by strong expectations ahead of the company's earnings report for the July quarter and guidance for the October quarter.
"We see the strong business trends exhibited over the prior year by NVDA set to continue aided by the official launch of the Blackwell architecture in the October quarter," the analysts wrote.
The investment bank views the launch of the Blackwell architecture as a catalyst for a new phase of growth, anticipating continued strong demand from cloud service providers (CSPs), enterprises, and sovereign entities. Analysts believe that demand for NVIDIA's upcoming B100/B200 products will significantly outpace supply.
In its bullish scenario, Piper Sandler says NVDA could exceed expectations by more than $2 billion in reported revenue for the July quarter, thanks to a recovery in networking supply.
"In our view, NVDA continues to be a premier player in the accelerated compute and gen AI end market," the analysts added.
Similarly, Loop Capital analysts increased their price target for Nvidia stock from $120 to $175, citing the company's potential to significantly exceed consensus revenue and earnings estimates for fiscal 2026.
Amazon ‘most favored among mega-caps’ - Wells Fargo (NYSE:WFC)
Wells Fargo analysts have identified Amazon (NASDAQ:AMZN) as the "most favored long among mega-caps" as the tech giant approaches its second-quarter earnings report.
Despite mixed hedge fund positioning for competitors like Meta (NASDAQ:META), Wells Fargo believes Amazon stands out due to strong performance expectations and positive forward commentary.
The bank's analysts predict an 18% increase in Amazon Web Services (AWS) revenue for the second quarter, with a sufficient operating income (OI) guidance of $16 billion for the third quarter.
Wells Fargo also plans to closely monitor Amazon's air freight commentary, estimating its impact on third-quarter operating income to be in the $200-$400 million range.
"See AMZN as the most favored long among mega-caps vs. META with more mixed HF positioning," the analysts stated, highlighting strong investor sentiment towards Amazon.
They note that the upcoming second-quarter earnings reports will be critical for understanding CapEx allocation and return time frames, especially given potential changes in AI strategy at AWS following the recent CEO change.
Apple seen as ‘more stable AI play for volatile times’, PT hiked
Raymond James analysts have raised their stock price target on Apple (NASDAQ:AAPL) to $250 from $200, describing the company as "a more stable AI play for volatile times." The firm maintained an Outperform rating on the stock, expecting a slight beat in F3Q24 results and an outlook in line with previous expectations.
This optimism is based on recent conversations in the Asia supply chain, TSM results, and China CAICT data, all indicating positive near-term trends for iPhone and Mac sales.
"We expect a slight beat and largely in-line outlook," the analysts wrote.
While near-term results may not significantly impact the AI narrative, Raymond James remains "optimistic that upcoming AI features will drive a multi-year iPhone upgrade cycle."
The firm pointed to upward revisions in iPhone 16 builds for the second half of 2024, based on supply chain conversations, and mentioned significant changes to the internals of the iPhone 17, indicating Apple's increased focus on enhancing on-device AI capabilities.
"Supply chain data also points to material changes to iPhone 17 internals, suggesting that Apple is looking to do more AI on the device," analysts noted.
Apple's unique position in offering on-device AI features stems from its strong ecosystem, advanced hardware capabilities, and a focus on privacy.
"We believe Apple is in a unique position to offer on-device AI features given its ecosystem strength, hardware capabilities, and privacy focus," the note added.
Baird: Buy QCOM after recent pullback
Earlier in the week, Baird analysts added Qualcomm (NASDAQ:QCOM) stock as a “Bullish Fresh Pick” and increased their target price on the stock to $250.
This revision follows Baird’s initial channel feedback, which revealed a procurement units estimate of over 90 million for the upcoming iPhone 16, a significant rise from the low 80 million units of previous iPhone launches.
“Similar to the Galaxy S24 launch earlier this year, AI is the driver,” analysts noted.
They expect strengthening demand trends in Qualcomm's handset business in the third quarter of the calendar year, following a seasonal trough in the second quarter and a year-over-year comparison trough in the first quarter.
Baird’s team believes that AI will drive double-digit increases in Qualcomm's average selling prices (ASPs) for various components, starting with the iPhone 16 in the second half of this year. Moreover, initial AI content in high-end phones from Chinese smartphone OEMs will contribute, followed by the next-generation Galaxy platform in the first half of 2025.
Radio Frequency (RF) ASP and content are also expected to benefit from AI beginning in the second half, driven by higher performance, faster uplinks, and greater integration.
Additionally, the investment firm pointed out a strong initial response for Qualcomm’s Snapdragon X Elite processor in South Korea, as the chipmaker is the first to market in the initial wave of AI in PCs.
Samsung (KS:005930) has launched Copilot+ PCs based on the X Elite, with demand surpassing initial channel expectations. Besides Samsung, the X Elite is also currently being shipped by HP (NYSE:HPQ), Dell (NYSE:DELL), Acer, Microsoft (NASDAQ:MSFT), and Lenovo.
“We would be buyers of QCOM shares on recent share pullback,” the analysts concluded.
UBS says AI optionality already priced in Tesla stock, sees downside risk
UBS analysts have reiterated their Sell rating on Tesla (NASDAQ:TSLA), citing substantial downside risk due to overvaluation and challenges in the automotive business highlighted in its latest quarterly report.
They believe Tesla's stock, which is currently trading at over 100 times its run-rate EPS of approximately $2.25, has a considerable amount of AI optionality already priced in, resulting in an inflated valuation.
"TSLA 2Q24 results showed the stress on the automotive business, just to keep vehicle deliveries ~1.78mm annualized units (which would be -2% y/y)," analysts noted.
The bank pointed out that Tesla's aggressive pricing and promotional strategies to stimulate demand have caused its auto gross margin, excluding credits, to drop to 14.6%, the lowest since the first quarter of 2019.
Adjusting for higher-than-normal credits and restructuring charges, UBS estimates Tesla's run-rate EPS to be around $0.56, which still includes a strong but potentially volatile quarter for its Energy business.
Looking ahead, analysts are skeptical about the near-term drivers for Tesla's earnings. While the introduction of a new lower-cost model and increased Full Self-Driving (FSD) take rates could provide some support, the analysts argue that even an improvement of $1 per share in earnings would still leave the stock trading at over 75 times its price-to-earnings ratio.
The analysts assert that Tesla's current stock price heavily relies on future AI initiatives such as robo-taxis and Optimus humanoid robots.
They believe Tesla's stock faces more downside risk if confidence in these AI initiatives wavers. Upcoming events like Robo-taxi day on October 10 could trigger a "sell-the-news" reaction, emphasizing the overvaluation of the stock based on uncertain future opportunities, analysts explained.