5 big analyst AI moves: iPhone demand at a turning point amid AI-driven supercycle

Source Investing
May 26, 2024 08:46

Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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iPhone ‘turning the corner with AI-driven supercycle’ - Wedbush

Wedbush analysts said recent Asia supply chain checks indicate stabilization for Apple’s iPhone, which has been grappling with a slowdown in sales for months.

In their note, the investment firm raised its price target for Apple's (NASDAQ:AAPL) stock from $250 to $275, noting that the stabilization is a very positive sign as the company approaches a significant iPhone 16 upgrade cycle.

Specifically, iPhone demand is "turning the corner into an AI-driven iPhone 16 supercycle," which is now on the horizon, wrote Wedbush.

"We believe AI technology being introduced into the Apple ecosystem will bring ample monetization opportunities on both the services as well as iPhone/hardware front and adds $30 to $40 per share to the Cupertino growth story as the vision starts to play out within the golden installed base of 2.2 billion iOS devices."

Wedbush said its recent checks in Taiwan imply that April results for Apple's supply chain were 2% ahead of historical linearity, while consensus remained unchanged.

"Outperforming during April was perhaps helped by inventory build ahead of China's holidays in May and June, though analysts have also seen a slight lift in Chinese handset build projections for the June quarter," says the firm.

Wedbush also expects Apple to lay the foundation for an AI App Store at the WWDC event in June, leading to significant Services growth over the coming years.

Microsoft to shape wider GenAI adoption - Goldman Sachs (NYSE:GS)

Microsoft (NASDAQ:MSFT) continues to lead in democratizing Gen-AI adoption, Goldman Sachs analysts said in a note this week, commending the company’s innovations across the tech stack following the Build event.

Goldman highlighted that Microsoft’s extensive offerings for both businesses and consumers position the company “to define how AI evolves into a more broadly used technology.”

Over the last 18 months, Microsoft has expanded its early innovations, putting a greater emphasis on cost efficiency from infrastructure to applications and hardware.

Analysts believe that the Windows maker is laying the foundational components to ensure the long-term relevance of new technologies.

“For this reason, the company’s announcements - from Copilot extensions, to the distillment of foundation models and AI-enabled PCs - we expect Microsoft to be able to sustain its first-mover advantage to continue to be a dominant player in the age of Gen-AI,” analysts wrote.

Morgan Stanley (NYSE:MS) upgrades Micron stock, says staying negative was ‘a mistake’

In a note to clients released Monday, analysts at Morgan Stanley raised their rating on Micron (NASDAQ:MU) shares, hinting that the memory chipmaker could issue “a positive preannouncement” this quarter.

The Wall Street firm upgraded MU stock from Underweight to Equal Weight, acknowledging that they had overestimated the impact of significant losses in 2023 on the company's valuation and underestimated the economic and narrative aspects of AI memory.

“Remaining negative for too long on MU was a mistake. We still are not positive, but we should have foreseen the fundamental and narrative implications of the strength in AI specialty memory,” analysts wrote.

The analysts also raised their 12-month target price for the stock from $98 to $130.

“We still see MU as fundamentally overvalued on long term DCF metrics But HBM continues to drive sentiment from memory buyers, leading to sustained pricing strength; could see positive preannouncement this quarter HBM supply may prove excessive in the end but we are still in ramp phase.”

Nvidia has ANET in its sights with its AI-optimized Ethernet solution - Rosenblatt

Last month, analysts at Rosenblatt Securities downgraded shares of Arista Networks (NYSE:ANET) to Sell, voicing concerns that Nvidia would emerge as a key Ethernet competitor to the networking company.

Although Arista recently said it still does not view NVIDIA Corporation (NASDAQ:NVDA) as a direct threat, analysts at Rosenblatt believe that the AI chipmaker has established itself as a significant Ethernet player during its latest earnings call.

“Nvidia began shipping Spectrum X Ethernet Networking in 1Q25. The solution is optimized for AI and, like Infiniband, is designed for the network to be a key part of the AI compute fabric,” analysts wrote.

“This is fundamentally different from what networks have been asked to do in the past, likely providing Nvidia with performance and competitive advantages over network-centric Ethernet players like ANET and Cisco (NASDAQ:CSCO),” they added.

Moreover, Rosenblatt said that Spectrum-X, Nvidia’s advanced networking platform designed to enhance data center performance for AI workloads, continues to gain traction with multiple customers, including a 100,000 GPU cluster.

The investment firm anticipates that this platform will evolve into a multibillion-dollar product line within a year.

AI PC war seen as positive for ARM, says BofA

Bank of America (NYSE:BAC) this week discussed the implications of the AI PC war on chipmakers, pointing out potential positive outcomes for some companies.

To be specific, the bank’s analysts see benefits for Arm Holdings ADR (NASDAQ:ARM), while the implications are neutral for Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD).

They explained that combining new ARM-based CPUs with greater power efficiency and high NPU TOPS count, along with new Windows software specifically optimized for ARM, Microsoft claims their new Copilot PCs are 58% faster than the current ARM-based MacBook Air and significantly more power efficient than Intel and AMD-based PCs.

"While next iterations of Intel/AMD processors should catch up in AI/NPU performance, we flag increased competition for PC CPUs overall, with Arm expected to take share (12% unit share in CY26E vs. just 2% in CY20) from x86 incumbents INTC/AMD," analysts wrote.

"Still, we expect AI PCs to carry ~10% ASP upliſt, or 20% upliſt for core component (like CPUs) vendors, offsetting some of the share loss."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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