Investing.com – Here are the biggest moves by analysts in the artificial intelligence (AI) space this week.
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New Street upgrades Nvidia to a buy rating, saying recent pullback provides opportunity for increased exposure
New Street Research this week upgraded NVIDIA Corp. (NASDAQ: ) to a “buy” rating with a price target of $120. The move comes after the chipmaker’s stock price fell sharply since its peak in June, causing Nvidia to lag other semiconductor stocks related to data center artificial intelligence.
“We find the overall correction to be healthy, and we recognize some limited and tactical headwinds specific to Nvidia, but overall we see the stock’s move as an opportunity for additional investment,” the analysts said.
Nvidia’s stock price has fallen recently in part due to reports that the release of its Blackwell chips could be delayed by three months due to design flaws. The delay could push shipments to the first quarter of 2025.
Blackwell’s design uses TSMC’s CoWoS-L packaging technology to interconnect two large wafers at 10TB/s. This technology faces challenges in increasing production capacity and may need to be redesigned.
To address this delay issue, Nvidia may extend the life cycle of its Hopper chips, which use the more mature CoWoS-S package and can be produced more efficiently. Additionally, New Street explains that Nvidia may launch a simplified version of the Blackwell chip with a single die.
“While its performance is lower than the dual-chip Blackwell SKU, it is still an improvement over the Hopper,” the analyst noted.
New Street also remains optimistic about Nvidia’s market dominance in data center XPUs.
While they acknowledge AMD (NASDAQ:AMD) as a potential challenger, “we’re seeing in-house XPUs perform well compared to GPUs and deploy millions in the huge on-premises captive market.”
In addition, expectations for ultra-large-scale capital expenditures in 2025 have increased, and are currently forecast to grow by 13%, of which artificial intelligence infrastructure capital expenditures are expected to grow by at least 30%. This supports the company’s forecast that AI semiconductor spending could grow 50% annually.
“Third in commercial artificial intelligence: Midrow downgrades Intel stock
Analysts at Mizuho on Wednesday downgraded Intel Corp. (NASDAQ: ) shares to neutral from outperform and adjusted the target price to $22 from $36.
The investment bank originally upgraded Intel’s rating in November 2023 on expectations of strong momentum in artificial intelligence and new products boosting the appeal of PCs and data centers. Nine months later, however, the outlook has changed.
“We were wrong, INTC continues to lag peers and lose share in all key markets AI/DC/PC through 2025,” the analysts wrote. “We see INTC’s headwinds continuing and its portfolio Execution risks, we downgrade INTC to Neutral. “
Mizuho noted that the technology gap between Intel and its competitors has widened, and while foundry and 18A tailwinds have long-term potential, restoring lost leadership may be challenging.
Despite launching new products in servers (Sierra Forest/Granite Rapids), AI (Gaudi 3), and PCs (Meteor Lake), Intel is losing market share in PCs and data centers, “in commercial AI Still far ahead of third place.” Mizuho also cited internal challenges, including layoffs that could impact morale and execution.
Analysts noted that the decision to cut the dividend further dampened investor sentiment towards the stock.
Bofa downgrades SMCI stock to neutral on margin headwinds
Earlier this week, Bank of America analysts downgraded Super Micro Computer (NASDAQ: ) stock to “neutral” from “buy” after the company reported fiscal fourth-quarter profit margins lower than Anticipated reporting.
Although fourth-quarter revenue was in line with company and market expectations, the gross profit margin of 11.3% was significantly lower than the expected 13.6%.
SMCI shares fell 20% on Wednesday.
The data center company’s revenue guidance for the first quarter of fiscal 2025 exceeded expectations, with its full fiscal 2025 revenue forecast of $28 billion, beating the consensus estimate of $23.8 billion.
However, Bank of America pointed out that AMD’s gross profit margin is expected to gradually return to the typical range of 14-17% by the end of fiscal 2025, assuming improved manufacturing efficiency, improved customer mix and the launch of new platforms.
“While the long-term benefits of AI remain intact, we move our rating to Neutral from Buy as we believe residual margins will be challenged in the coming quarters as SMCI faces a competitive pricing environment , shipment delays for Blackwell GPU systems requiring Liquid.
To reflect these headwinds, they also lowered AMD’s price target to $700 from $1,090, in line with the broader industry trend of significantly lower valuation multiples.
Wedbush: Palantir’s partnership with Microsoft is ‘launchpad for the AIP story’
Palantir (NYSE: ) and Microsoft Corp. (NASDAQ: ) announced a partnership this week to develop an integrated technology suite designed for the U.S. defense and intelligence communities.
The partnership will leverage Palantir’s AI platform in Microsoft’s government and classified cloud to enable secure cloud, AI and analytics capabilities.
As part of the agreement, Palantir will deploy its complete product suite, including Foundry, Gotham, Apollo and AIP, on Microsoft’s cloud platform. This will enable government agencies to build artificial intelligence tools for operational and logistical purposes and test the technology through practical experience.
In addition, Palantir will integrate Microsoft’s Azure OpenAI service into a secure environment, combining cloud computing with high-level language models to support artificial intelligence-driven defense and intelligence operations.
Wedbush analysts commented: “With this major deal solidified and MSFT leveraging PLTR to deliver AI and LLM capabilities to the U.S. government, the company can now accelerate the pace of AI implementation while PLTR continues to accelerate AIP adoption in the federal sector. ”
“We believe this will serve as a springboard for the PLTR AIP story to impact DoD and the broader Beltway ecosystem over the next 12 to 18 months,” they added.
Citi reiterates Micron as top choice for DRAM with strong prospects
Semiconductor stocks have fallen sharply recently, driven by macroeconomic challenges and disappointing profits that missed high expectations. The downturn is linked to slower-than-expected simulated inventory replenishment and potential risks in the automotive industry, which accounts for 14% of semiconductor demand.
However, Citi analysts remain optimistic about the sector, stressing that “the main reasons for our optimism – AI and memory strength – remain intact.”
Despite its recent share price decline, Citi still likes Micron Technology (NASDAQ: ) as its top pick in the industry. They believe that “the DRAM upturn should continue given the reduced capacity and better-than-expected DRAM pricing in the third quarter of 2024, so now is the time to double down.”
The DRAM market is showing signs of improvement, with major players such as Samsung (KS: ) and SK Hynix showing strong performance.
Citi analysts have revised their forecasts for DRAM pricing in 2024 and now expect an annual increase of 62%, up from the previous forecast of 53%. This adjustment is attributed to limited supply growth and memory manufacturers’ shift to high-bandwidth memory (HBM).
Despite weaknesses in the automotive and industrial sectors, demand remains relatively strong in the largest end markets (PCs, mobile phones and servers), which together account for 61% of semiconductor demand.
Micron reports that inventory levels in the traditional data center market have improved in the first half of 2024 and are expected to grow further in the second half.
Citi analysts also said they “expect an increase in guidance when Micron Technology reports earnings in September.”
Micron Technology’s stock price has fallen more than 30% in the past month.
