Investing.com — Here are analysts’ biggest moves in artificial intelligence (AI) this week.
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Rosenblatt downgrades Google shares due to increasing transition risk
A Rosenblatt analyst downgraded Alphabet (NASDAQ:) stock to Neutral from Buy, based on “several areas of transition risk that recommend taking a step back to see how the company handles this.”
The investment bank identified several risks for the tech giant, including the impact of AI on search, which could negatively impact search advertising revenue due to the introduction of AI summaries. The analyst also noted emerging evidence of search share losses for Bing.
Additionally, the shift in search advertising revenue to retail media networks is expected to accelerate as retailers like Walmart (NYSE:) follow Amazon’s (NASDAQ:) lead in this space.
Another risk highlighted by Rosenblatt is Amazon’s aggressive entry into video advertising, with ads showing as standard on Prime Video this year and a strong upfront sales effort launched in May, which could potentially impact the ad sales dynamics on YouTube.
“We also see the risk that competitive dynamics could push Alphabet into a higher-than-expected AI investment cycle,” the analyst added.
Trumps on Nvidia: ‘Number one can become number one’
NVIDIA Corporation (NASDAQ:) recently became the number one company in terms of market valuation, and according to Truist Securities analysts, the company can grow from number one to number one.
On June 18, Nvidia’s market cap reached $3.34 trillion, surpassing Microsoft (NASDAQ:) as the world’s most valuable publicly traded company. Nvidia’s shares then fell for several sessions, causing it to lose the top spot.
“We believed that even if fundamentals converge, price upside could be limited due to trading and technical challenges associated with NVDA’s No. 1 market cap position,” Truist analysts noted.
Nevertheless, Truist’s analysis suggests that achieving the largest market capitalization is not inherently a barrier to future investment returns.
The firm assessed the investment returns and valuations of stocks that previously had the highest market capitalization over the past 26 years, including Microsoft, Cisco (NASDAQ:), ExxonMobil (NYSE:), Apple and Amazon.
The findings showed that most of these stocks underperformed the S&P 500 index over short periods of one week, one month, and three months after reaching their highest market capitalization. However, over longer periods of one year, three years and five years, these stocks generally outperformed the S&P 500, Truist analysts noted.
Rosenblatt calls on Apple to buy, says privacy-focused AI can increase market share
Rosenblatt Securities upgraded shares of Apple Inc (NASDAQ:) to Buy this week, citing the potential of the company’s privacy-focused Apple Intelligence platform to increase market share in the AI sector.
This decision follows a study by Rosenblatt, which found that privacy is the most sought-after feature among American consumers when it comes to AI technology.
The survey, which attracted more than 500 responses, used a “MaxDiff” rating system to rate 15 key features of early smartphone AI. Privacy emerged as the top priority, with 17.8% positive responses, surpassing the next feature, Insight, by 5.6 percentage points.
“Given that Apple has uniquely identified Private Cloud Compute as core to its approach, building on a recent history of stronger safeguards for app store ad privacy and contrasting with rivals’ AI privacy mishaps, Apple appears to be positioned to gain brand interest and AI market share. from the out-of-the-gate focus on strong privacy,” analysts wrote.
Rosenblatt also highlighted Apple’s strategic focus on specialized large language models (LLMs) and Apple silicon, which appears to be shielding the company from the cost pressures hitting other tech giants.
Analysts are raising price targets for Micron despite the post-earnings decline
Shares of AI memory chip maker Micron Technology Inc (NASDAQ:) fell after it reported its latest quarterly results on Wednesday.
Citi analysts attributed the decline to the company’s conservative guidance and increased capital expenditures. However, they maintained a positive outlook, suggesting investors should “buy MU on weakness as DRAM’s rebound thesis remains intact and we expect sequentially higher revenues, earnings per share and gross margins through C25.”
In line with this view, Citi reiterated its buy rating with a $175 price target on Micron stock, raising its fiscal 2024 earnings per share (EPS) estimate from $0.52 to $0.66.
JPMorgan analysts shared a similar sentiment, expressing confidence in Micron’s ability to capitalize on memory content demand driven by AI and accelerated computer server deployments. They noted that the company’s HBM3e capacity is sold out through 2025 and demand is starting to emerge for 2026.
“Gross margins for HBM3e and eSSD are both accretive to their respective segments and we believe this should structurally increase their profitability profiles when combined with cyclical supply/demand-related price increases,” JPMorgan analysts wrote.
“We believe the stock should outperform in 2024 and 2025 as the market continues to discount the improvement in sales/margin/earnings power.”
JPMorgan reiterated its Overweight rating on Micron stock, setting a $180 price target for December 2025 and highlighting MU as “one of our top picks in the semifinals next year.”
Stifel Starts Tesla at Buy, Sees Strong Potential in AI-Based FSD
Earlier this week, analysts at investment bank Stifel started investigating Tesla Inc (NASDAQ:) with a buy rating and a price target of $265.00.
They believe Tesla is well positioned for substantial growth in the coming years, especially between 2025 and 2027. In the near term, the refreshed Model 3 and upcoming Model Y refresh are expected to drive sales. Furthermore, production of the next generation Model 2 is expected to attract strong demand.
“We also believe that TSLA’s AI-based Full Self-Driving (FSD) initiative has the potential to generate significant value through FSD sales, potential licensing deals and as a critical enabler for longer-term RoboTaxi initiatives,” wrote Stifel Analysts.
However, they also pointed to some near-term risks, including supply levels following disappointing first-quarter 2024 results, challenges in electric vehicle adoption and uncertainties related to the US elections.
