Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Apple’s AI partnership with Alibaba is a ‘big step forward,’ analyst says
Apple's (NASDAQ:AAPL) team-up with Alibaba (NYSE:BABA) as part of its China AI strategy represents “a big step forward” for the tech giant, according to Wedbush analyst Daniel Ives.
The collaboration ends Apple’s search for a Chinese tech partner, a crucial step for launching its AI services in the region. Alongside Baidu's (NASDAQ:BIDU) involvement, the partnership is expected to boost Apple’s growth in China, with an AI service launch reportedly set for early May.
“The biggest missing piece in Apple's AI launch has been its China strategy which has been in a holding pattern until a Chinese tech partner was officially approved by Beijing and set to launch," Ives said in a note to clients.
The analyst expects the partnership to accelerate iPhone upgrades in China, where over 100 million of the estimated 200 million iPhones are due for an upgrade. Despite losing market share to Huawei last year, Apple is anticipated to regain traction with Apple Intelligence, debuting on the iPhone 16 and further driving demand with the iPhone 17 release in September.
Apple Intelligence has already fueled upgrade cycles in the U.S., with similar expectations for China. “We continue to view this first launch of Apple Intelligence as just the beginning of a broader AI strategy for Apple as we estimate roughly 25% of the world's population will eventually access AI through an Apple device over the next few years,” Wedbush's team continued.
The investment bank also forecasts that apps built on Apple Intelligence will generate a significant new revenue stream and encourage more device upgrades in the coming years.
Phillip Securities downgrades Amazon stock
Earlier in the week, the investment management firm Phillip Securities downgraded Amazon.com Inc (NASDAQ:AMZN) from Buy to Accumulate, citing the stock’s recent price strength despite strong earnings performance. The firm also raised its discounted cash flow (DCF) target price to $270 from $240.
“Due to recent share price strength, we downgrade our recommendation from Buy to Accumulate and raise our DCF target price," Phillip Securities analysts said.
Amazon’s fourth-quarter revenue met expectations, while profit after tax and minority interest (PATMI) exceeded forecasts, driven by higher operating leverage and disciplined cost management. Full-year revenue and PATMI reached 100% and 112% of Phillip’s FY24 estimates, respectively.
Amazon Web Services (AWS) remained the key growth engine, with a 19% year-on-year revenue increase. AWS operating margins rose 7.3 percentage points to 36.9%, aided by cost efficiencies and an extended server lifespan, contributing to a 200-basis-point margin expansion.
Phillip Securities rolled forward its valuation model but slightly reduced its FY25 revenue and PATMI estimates by 1%, reflecting the leap-year effect, changes in service life estimates, and increased useful life of heavy equipment.
Despite the downgrade, the firm remains optimistic about Amazon’s long-term potential, particularly in generative AI and cloud migration. "We believe AMZN is well-positioned in generative AI and should benefit from cloud migration as it is still in the early stage."
AI rally at risk of outages, Barclays (LON:BARC) says
Barclays has cautioned that the recent rally in power stocks driven by the AI boom could face additional risks, especially following the release of DeepSeek’s R1 Large Language Model (LLM).
In a report, the bank pointed out that power companies have been significant beneficiaries of the AI surge, fueled by the rapid growth of data centers and the corresponding rise in electricity demand forecasts.
Citing a U.S. Department of Energy study, Barclays highlighted that electricity demand from data centers is expected to grow by 14%-21% annually through 2030, potentially tripling to as much as 560 terawatt hours (TWh), or 13% of total U.S. electricity consumption.
However, DeepSeek’s new AI model, which Barclays described as one that "purportedly required few resources compared to traditional models from OpenAI, Google (NASDAQ:GOOGL), Meta (NASDAQ:META), etc.," has raised questions about this optimistic outlook.
The announcement triggered a sharp sell-off in power stocks, with companies like Vistra Energy Corp (NYSE:VST), Constellation Energy (NASDAQ:CEG), and Talen Energy Corp (NASDAQ:TLN) among those hit hardest on January 27, even seeing steeper declines than Nvidia (NASDAQ:NVDA).
“With their volatilities screening fairly rich, bearish risk reversals look attractive, as these take advantage of historically flat skews," Barclays analysts wrote.
Although power stocks have recovered somewhat, the analysts noted that "the recovery from the sell-off trails other AI-sensitive stocks," indicating lingering investor caution regarding potential AI-related disruptions.
They ultimately recommended “hedges in AI-exposed power names to guard against further shocks amid the rapidly evolving AI narrative.”
Needham: Tesla is still an “expensive stock”
Needham analysts have reiterated a Hold rating on Tesla Inc (NASDAQ:TSLA), maintaining that the electric vehicle (EV) giant remains “an expensive stock.”
The firm argues that Tesla’s anticipated growth drivers—Full Self-Driving (FSD), Robotaxi, and Robotics—are already reflected in its current valuation.
“TSLA [needs] to trade at 50x our new '32 estimates discounted back to drive ~30% upside from current prices, despite TSLA operating from a trailing position in autonomous rideshare and the early stage nature of the Robotics business,” said analysts led by Chris Pierce in a note this week.
Needham’s projections for fiscal 2032 include the launch of a more affordable Tesla model, though they remain cautious about profit margins, expecting the company to continue prioritizing volume over profitability. The firm also highlighted Tesla’s challenges in the autonomous rideshare market, where it lags behind competitors, and in its early-stage Robotics segment.
For FSD, Needham forecasts 31 million Tesla vehicles on the road by 2032 with a 56% FSD adoption rate and 90% gross margins, though they acknowledged this could be optimistic, particularly as Nvidia has described fully autonomous cars as “a next decade marvel.”
In the Robotaxi business, the firm estimates $100 billion in bookings by 2032, a target they view as “aggressive” unless Tesla significantly expands its market share or the U.S. rideshare market grows substantially. Needham also predicts Tesla will sell around 1.3 million robots at an average price of $30,000 with 30% gross margins, consistent with the company’s guidance.
Ultimately, Needham believes Tesla’s 2032 financial outlook is unlikely to support substantial stock price gains unless the company secures a leading position in an expanded rideshare market.
Lynx: SMCI is ‘poised for upside surprises’
Super Micro Computer (NASDAQ:SMCI) has “made good progress in climbing out of the deep hole it finds itself in,” according to Lynx Equity Strategy analysts, following the company’s recent earnings report.
A key highlight was the AI server maker's success in raising capital from private investors, which Lynx noted implies that “savvy private investors appear to be comfortable with company financials, order pipeline and regulatory issues if any.” This, they added, should help restore confidence in the stock even before the company completes its planned SEC filings.
SMCI’s management confirmed that the company remains on track to file its 10-K and 10-Q reports within the extension period granted by the stock exchange. Lynx emphasized that regulatory compliance and access to capital markets were “critical elements of our long call three months ago and our previous PT of $45.”
The firm raised its price target to $60 two months ago, citing positive developments in revenue growth potential, margins, manufacturing capacity, competitive positioning, and cash management as tailwinds for the stock.
Lynx also highlighted that SMCI’s manufacturing capacity expansions in the U.S., Taiwan, and Malaysia are largely complete, with capital expenditures expected to decline going forward. With “renewed access to capital markets, plenty of manufacturing capacity available, leadership in deploying liquid cooled NVDA racks at scale, we think SMCI is poised for upside surprises,” Lynx said.
Even if the rollout of Nvidia’s Blackwell chips is slower than expected, Lynx believes that continued deployments of the H100 and H200 chips will support SMCI’s revenue growth and stable margins.