Proactive Investors - Analysts at Bank of America (NYSE:BAC) have upped their price objectives on two stocks they consider to be their top picks in the emerging market for AI features for on-device, also known as Edge AI: Arm Holdings PLC (NASDAQ:ARM) and Micron Technology Inc (NASDAQ:MU).
They raised their price target on ARM to $180 from $150 and for Micron they lifted their price objective to $170 from $144.
ARM traded hands at $167 and Micron at $153 late morning on Tuesday.
The bank’s analysts see the two most important beneficiaries of Edge AI to be compute and memory chips.
They highlighted that while data center AI is enabling cloud/enterprise AI adoption at scale, Edge AI applications promise speed, security, and privacy.
“To be sure, it's early days and there are no must-have AI apps for phones and PC. However, consumer hardware companies will regardless try to leverage rising consumer interest and growing software ecosystem momentum to drive a faster upgrade cycle,” they wrote.
“Recall the same trend took place in 4G/5G deployments when devices with advanced hardware preceded the emergence of mobile applications such as Instagram and Uber that emerged later. While 4G/5G ushered the need for better cellular modems/RF, we believe on-device AI will be most beneficial for processor and memory companies.”
ARM is seen benefitting from two critical drivers, the first being faster conversion from its v8 to v9 architecture and total compute solution.
It is also expected to gain market share against Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD) as more licensees adopt its technology to deliver power-efficient processors for client and data center.
The bank’s analysts see Micron as a key beneficiary of rising high-bandwidth memory share in cloud and of the 12% to 15% annual increase in DRAM requirements to support AI PCs and smartphones.