Investing.com — Here are analysts’ biggest trends in the artificial intelligence (AI) space this week.
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Analysts raise Nvidia stock price estimates ahead of Blackwell launch
Analysts at Piper Sandler on Monday reaffirmed their overweight rating on NVIDIA (NASDAQ:) shares and raised their price target to $140 from $120 following strong expectations for the company’s July-quarter earnings report and October-quarter outlook.
“We expect the strong business trends NVDA demonstrated last year to continue, buoyed by the official release of the Blackwell architecture in the October quarter,” the analysts wrote.
The investment bank sees the launch of the Blackwell architecture as the catalyst for a new phase of growth and expects continued strong demand from cloud service providers (CSPs), enterprises and government agencies. The analyst believes demand for NVIDIA’s upcoming B100/B200 products will significantly exceed supply.
In its bull scenario, Piper Sandler said a recovery in network supply could help NVDA report revenue for the July quarter that beat expectations by more than $2 billion.
“In our view, NVDA will remain a major player in the accelerated computing and AI generation end markets,” the analysts added.
Similarly, analysts at Loop Capital raised their price target on Nvidia shares to $175 from $120, citing the company’s potential to significantly beat consensus revenue and profit estimates for fiscal 2026.
Amazon is ‘Most Popular among Mega-Caps’ – Wells Fargo
Wells Fargo analysts have named Amazon (NASDAQ:) their “most preferred long stock among large-cap stocks” as the stock approaches second-quarter earnings.
Hedge funds’ positioning on rivals like Meta (NASDAQ:) is mixed, but Wells Fargo believes Amazon stands out due to its high earnings expectations and positive outlook.
The bank’s analysts expect second-quarter Amazon Web Services (AWS) revenue to grow 18% and support a healthy third-quarter operating income (OI) guidance of $16 billion.
Wells Fargo also plans to closely monitor Amazon’s comments on air cargo and estimates the impact to its third-quarter operating profit to be in the range of $200 million to $400 million.
“Among the mega-caps, AMZN appears to be the most favored long position versus META, which has a more mixed HF position,” the analysts said, highlighting strong investor sentiment toward Amazon.
They note that the upcoming second quarter earnings report will be crucial in understanding capital expenditure allocations and payback periods, especially given potential changes in AWS’ AI strategy following the recent CEO transition.
PT rises as Apple is seen as “a more stable AI company in volatile times”
Raymond James analysts raised their price target on Apple (NASDAQ:) to $250 from $200, calling the company “a more stable AI investment in volatile times.” They maintained an outperform rating on the stock and expect third-quarter 2024 earnings to be slightly better than expected, with outlook in line with previous expectations.
This optimism is based on recent conversations in the Asian supply chain, TSM results, and China CAICT data, all of which point to positive near-term trends in iPhone and Mac sales.
“We expect a broadly in-line outlook with some upside,” the analysts wrote.
While short-term results may not have a significant impact on the AI narrative, Raymond-James is “optimistic that upcoming AI features will drive multi-year iPhone upgrade cycles.”
The company noted that iPhone 16 builds for late 2024 will be revised upwards based on supply chain conversations, and noted major changes to the iPhone 17’s internals, indicating Apple’s focus on enhancing on-device AI capabilities.
“Supply chain data also points to big changes under the hood of the iPhone 17, suggesting that Apple is looking to pack more AI into the device,” the analysts said.
Apple’s unique position in delivering on-device AI capabilities stems from its strong ecosystem, advanced hardware capabilities, and focus on privacy.
“We believe that Apple is uniquely positioned to offer on-device AI capabilities given the strength of its ecosystem, hardware capabilities, and focus on privacy,” the memo added.
Baird: Buy QCOM after recent drop
Earlier this week, Baird analysts added Qualcomm (NASDAQ:) shares to their “Strong Fresh Picks” and increased their price target to $250.
The revision follows Baird’s initial channel feedback, which revealed procurement estimates for the upcoming iPhone 16 at more than 90 million units, a significant increase from a low figure of 80 million units at the previous iPhone launch.
“Similar to the Galaxy S24 launch earlier this year, it is driven by AI,” the analyst noted.
They expect demand trends for Qualcomm’s mobile phone business to strengthen in the third calendar quarter, following a seasonal trough in the second quarter and a year-over-year trough in the first quarter.
Baird’s team believes AI will drive double-digit increases in the average selling price (ASP) of Qualcomm’s various components, starting with the iPhone 16 later this year, along with early AI content in high-end smartphones from Chinese smartphone OEMs, followed by the next generation of the Galaxy platform in the first half of 2025.
Radio frequency (RF) ASPs and content are also expected to benefit from AI from the second half of the year due to improved performance, faster uplinks, and greater integration.
Additionally, the investment firm noted that Qualcomm’s Snapdragon X Elite processor, the first chipmaker to bring to market the first wave of AI for PCs, has seen a strong initial response in South Korea.
Samsung (KS:) has launched its Copilot+ PC based on the X Elite, and demand has exceeded initial channel expectations. In addition to Samsung, the X Elite is now also shipping from HP (NYSE:), Dell (NYSE:), Acer, Microsoft (NASDAQ:) and Lenovo.
“Given the recent share price decline, we would buy QCOM shares,” the analysts concluded.
UBS says AI options are already priced into Tesla shares, predicting downside risk
UBS analysts reiterated their sell rating on Tesla (NASDAQ:), citing significant downside risk from overvaluation and challenges at the auto business highlighted in the company’s latest quarterly report.
They believe that Tesla shares are currently trading at more than 100 times EPS of about $2.25, meaning that a significant amount of AI options are already priced in and, as a result, the stock is overvalued.
“TSLA’s second-quarter 2024 results indicate pressure on its auto business, sufficient to limit vehicle shipments to around 1.78 million units per year (-2% y/y),” the analysts noted.
The bank noted that Tesla’s aggressive pricing and promotional strategy to stimulate demand caused its auto division’s gross margin excluding credit to fall to 14.6 percent, the lowest since the first quarter of 2019.
Adjusting for higher than normal credit lending and restructuring charges, UBS expects Tesla’s run-rate EPS to be about $0.56, which still includes a strong but shaky quarter for its energy business.
Looking ahead, analysts are skeptical of Tesla’s near-term earnings drivers. The introduction of new lower-cost models and rising adoption rates of full self-driving (FSD) could provide some support, but analysts argue that even a $1 improvement in earnings per share would still see the stock trade at more than 75 times earnings.
Analysts argue that Tesla’s current stock price hinges heavily on future AI initiatives such as robotaxis and the Optimus humanoid robot.
Analysts believe Tesla’s stock price is at greater risk of downside if confidence in these AI efforts wavers: Upcoming events such as Robotaxi Day on October 10 could trigger a “news sell” reaction, highlighting the stock’s overvaluation based on uncertain future opportunities, they explained.
