Investing.com — Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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‘AI stands for Apple Intelligence:’ DA Davidson upgrades Apple to Buy
Analysts at asset manager DA Davidson upgraded shares of Apple (NASDAQ:) from Neutral to Buy this week after the iPhone maker introduced its long-awaited AI strategy.
According to the company’s analysts, “AI now stands for Apple Intelligence,” the name of the company’s artificial intelligence platform unveiled at the WWDC event.
DA Davidson also raised his price target from $200 to $230.
“Another Napster-to-iTunes moment. We believe yesterday’s presentation rhymes with one of Apple’s previous milestone moments: moving digital music from a standalone app of dubious legal status (like Napster) to an experience that is integrated into existing consumer applications (such as iTunes),” analysts wrote.
“We believe that the integration of summaries, enhanced search, multimodality, text generation and enhanced photo editing into the existing ecosystem will drive much broader adoption of AI than we have seen to date,” she added.
Analysts also highlighted that Apple is the first to introduce a meaningful agent capability, allowing Siri and other tools to perform tasks on behalf of the user. Furthermore, they emphasize that Apple is uniquely positioned to offer these capabilities and “may be the only one that can do so soon.”
AMD downgraded as Morgan Stanley favors Nvidia and Broadcom
Meanwhile, AI chipmaker Advanced Micro Devices (NASDAQ:) was downgraded by Morgan Stanley on Monday, from Overweight to Equal Weight.
While the bank still supports the overall story, it believes that investor expectations for AMD’s AI business are too high. Morgan Stanley analysts believe current AI expectations leave little room for much upside, despite a recovery in core businesses.
“As of now, we see limited upside revision potential for AI,” analysts wrote.
Additionally, Morgan Stanley notes that AMD appears expensive compared to other major AI companies such as NVIDIA Corporation (NASDAQ:) and Broadcom Inc (NASDAQ:), where the bank is more confident in upward revisions to AI forecasts.
Despite the downgrade, Morgan Stanley analysts continue to view AMD’s product lineup as a strong competitor in the client and server CPU markets this year.
Melius downgrades Adobe as enterprise software faces AI challenges
Earlier this week, Melius analysts downgraded their rating on Adobe (NASDAQ:) stock from Buy to Hold, with a price target of $510.
The investment firm notes that the enterprise application software sector is facing AI challenges, drawing parallels to how on-premise hardware companies were affected by the shift to the cloud in the 2010s. They suggest this trend could last longer persist than expected.
Melius emphasizes that AI, enabled by companies like Nvidia and major cloud platforms, will accelerate the creation, customization and deployment of software. Additionally, coding tools allow smaller AI-first competitors to emerge more easily.
They also point out that most SaaS companies have been raising prices for years, making it harder to charge extra for AI, and that AI-powered productivity could disrupt the traditional ‘chair model’ business approach, which points to a possible transition in business models.
“Additionally, we see AI as a disruptor for traditional databases, as unstructured data increases in both importance and usefulness,” Melius analysts said. “In short, you could see AI’s impact on Snowflake (NYSE:) and even parts of Oracle (NYSE:) with a hold rating, as well as a preliminary impact on Salesforce (NYSE:) and Workday (NASDAQ:).
Broadcom is “one of the strongest AI players,” says Morgan Stanley
Ahead of its better-than-expected earnings report released Wednesday, Morgan Stanley reiterated its Overweight rating on Broadcom, describing the semiconductor company as “one of the strongest AI players.”
The Wall Street giant pointed to several key catalysts for their positive outlook, including Broadcom’s growth prospects in AI, potential synergies from its acquisition of VMware (NYSE:) and recovery in its core semiconductor business.
The bank’s analysts predict Broadcom’s AI revenues will rise from $4.2 billion in FY2023 to $14 billion in FY2025, which would account for about 39% of the company’s expected semiconductor revenues.
“We expect Broadcom to easily meet, if not slightly exceed, its AI targets,” the analysts noted. They believe Broadcom is poised to benefit from the deployment of Ethernet in AI data centers, the continued ramp-up of Google’s TPU, and the addition of two new ASIC clients.
MS: Tesla could make an AI-powered phone
According to Morgan Stanley analysts, Tesla (NASDAQ:) could soon enter the smartphone market.
“The car is an extension of the telephone. The phone is an extension of the car,” the Wall Street firm noted, based on conversations with automotive executives and industry experts. “The lines between car and phone are really blurring,” she added.
Morgan Stanley analysts have long pondered Tesla’s potential to expand into edge computing domains beyond vehicles. In October, they highlighted the concept of a mobile AI assistant as a key innovation.
This idea resurfaced when Tesla CEO Elon Musk said developing such a device is “not out of the question” after Apple’s WWDC.
“As Mr. Musk continues to invest in his own LLM/genAI efforts, such as ‘Grok,’ the potential strategic and user experience overlap becomes more apparent,” the analysts wrote.
Supercomputing at both data center and edge levels is becoming increasingly relevant from an automotive perspective. The latest Tesla vehicles, which can perform over-the-air firmware updates, contain batteries with the energy equivalent of about 2,000 iPhones and are equipped with liquid-cooled inference supercomputers.
Morgan Stanley wondered, “What if your phone could tap into your vehicle’s computing power and battery power to run AI applications?” They pointed out that edge computing and AI have highlighted challenges such as battery life, thermal management and latency in integrating powerful AI-driven applications with today’s smartphones.
“Any Tesla owner will tell you how he uses his smartphone as a primary key to unlock his car and run other third-party applications while interacting with his car,” the analysts said.
