Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Buy Nvidia stock pullback - UBS, BofA
Wall Street analysts are urging investors to take advantage of the recent pullback in Nvidia (NASDAQ:NVDA) shares. Despite the AI giant’s quarterly forecast falling short of the lofty expectations set by investors, who have driven a massive rally in its stock on hopes for generative AI, analysts remain bullish.
Nvidia's shares dropped more than 6% on Thursday after the fiscal Q2 report was released. While the company reported significant growth and profit, the results were viewed as mixed, as revenue and gross margin projections didn’t surpass Wall Street's lofty targets as they had in previous quarters.
UBS analysts, however, believe investors should “buy the pullback,” noting that key indicators for Nvidia remain bullish. The bank specifically pointed to the surge in Nvidia’s purchase commitments and supply obligations, describing this as “the most important metric we watch and a harbinger of future growth.”
UBS analysts also expressed confidence in Nvidia's margins, stating they are not concerned about gross margins and expect data center margins to stay consistent through the Blackwell cycle, mirroring the stability seen during the Hopper cycle.
Similarly, Bank of America (NYSE:BAC) analysts reiterated their Buy rating on Nvidia stock following the report and raised the target price from $150 to $165.
BofA acknowledged that the stock is “likely to be volatile” in the near term due to Nvidia’s projections missing elevated expectations, and noted that rising Blackwell ramp costs could impact Q3 margins.
Nonetheless, BofA remains confident in Nvidia’s long-term prospects, stressing that they “continue to believe in NVDA’s unique growth opportunity, execution and dominant 80%+ share as generative AI deployments are still in their first 1-1.5 years of what is at least a 3-4 year upfront investment cycle.”
“AI deployment remains a mission-critical imperative for global cloud and enterprise customers, with NVDA providing the best turnkey model.”
Citi moves Apple to Top Pick
Citi analysts have elevated Apple (NASDAQ:AAPL) to their “top AI pick” for 2025, surpassing both Nvidia and Arista Networks (NYSE:ANET). This move comes as Apple gears up to unveil its iPhone 16 lineup at the “It’s Glowtime” product event on September 9th.
At the event, Apple is expected to introduce several key updates, including A18 chips utilizing the N3E process with an enhanced neural engine, improved camera and microphone features, and an upgraded modem for the Pro models.
“Apple’s September event is generally all about hardware updates, but we believe the company will put a lot of focus on how the hardware updates for the iPhone 16 family can better support its Apple Intelligence features that are expected to roll out officially later in the fall,” Citi analysts remarked.
Looking ahead, Citi expects a major refresh with the iPhone 17 next year, with AI features gradually being introduced over the coming year. This phased rollout is expected to give developers time to create apps and allow Apple to build customer recognition.
Citi projects iPhone 16 and iPhone 17 unit sales to reach 85 million and 92 million in calendar years 2024 and 2025, respectively. Total iPhone units are expected to hit 228 million in 2024 and 241 million in 2025.
The analysts also highlighted that “AAPL stock on average outperformed the broader market since 2016 by 5%-6% over the period from June-quarter earnings date into the September iPhone release date.”
AI bubble burst bigger concern than recession - BCA Research
Investors should be more concerned about the potential bursting of the AI bubble than a looming U.S. or global recession, according to strategists at BCA Research. The firm’s analysis suggests that the risks associated with the rapidly growing AI sector are more serious than those posed by broader economic downturns.
"When bubbles burst, the investment priority is to steer well clear of the bursting bubble plus sectors, regions, and countries heavily exposed to it." This implies that regardless of whether a recession follows the collapse of the bubble, the primary focus should be on avoiding the areas most impacted by the fallout.
In line with this, BCA Research advises investors to underweight U.S. tech and quasi-tech sectors, which are closely tied to the AI boom, and to reduce their exposure to U.S. equities within a global portfolio.
"Investors should worry much less about a U.S. or global recession than they should worry about the bubble in anything AI-related,” BCA noted.
With the AI sector continuing to attract significant attention and capital, BCA warns that the potential for a sharp correction poses a noteworthy threat.
William Blair starts Tesla coverage with a Buy rating
William Blair has initiated research coverage of Tesla (NASDAQ:TSLA) with an Outperform (Buy) rating, primarily driven by the underappreciated potential of Tesla's energy storage business.
The firm believes that Tesla Energy, particularly its Megapack and Powerwall products, could emerge as a significant growth driver, especially as expectations for the electric vehicle (EV) segment moderate in the near term.
“We view Tesla Energy as the most underappreciated component of the Tesla story and expect the narrative will shift toward the energy storage business in light of tempered EV expectations in the near term."
The analysts highlight three key factors that make Tesla's energy storage business a compelling investment: the need for grid stabilization, the expansion of data centers, and the integration of renewable energy sources.
These aspects, alongside Tesla's broader automotive business and emerging opportunities in AI, robotaxis, and robotics, position the company as a technology leader with what William Blair describes as an "Apple-esque ecosystem for the future of energy."
"Energy is the foundation for life, an abundance or lack of which determines how far society can reach on Maslow's hierarchy of needs."
Tesla's approach to energy, through its more efficient EVs, energy storage solutions, and innovations like robotaxis and humanoid robots, aims to revolutionize how energy is created, stored, and utilized, with broad societal implications.
While Tesla's current valuation may appear high by traditional metrics, William Blair argues that this premium is justified.
"Using traditional comparable analysis with auto or even tech, we understand the difficulty justifying the valuation, but in our opinion, this misunderstands the Tesla story."
They believe that the halo effect created by Elon Musk, the company’s culture of first principles, and its technological advantages warrant the valuation premium.
Citi opens Positive Catalyst Watch on Marvell stock
Citi analysts maintained their Buy rating on Marvell (NASDAQ:MRVL) stock with a $91 price target, based on an 18% higher-than-consensus CY25 earnings per share (EPS) following the July-quarter results.
The investment bank sees Marvell capitalizing on strong AI investments to rapidly expand its AI ASIC business, with four AI ASIC projects in the pipeline—two currently ramping up, one expected in 2025, and another in 2026.
Moreover, Citi is adding a Positive Catalyst Watch ahead of next week's Technology Conference, where Marvell's CEO Matt Murphy will participate in a fireside chat.
"We expect management to sound bullish on AI growth exceeding prior 2024/25 AI sales targets and all non-AI end markets to recover in 2H24,” analysts wrote.
"MRVL stock typically outperforms when all its end markets move in the same direction,” they added.