Investing.com — A look at this week's biggest analyst moves in the artificial intelligence (AI) space.
InvestingPro subscribers are always the first to know what market-moving AI analysts are saying. Upgrade today!
BofA expects 40% more upside in Nvidia stock
Bank of America analysts this week reaffirmed their Buy rating on Nvidia (NASDAQ:) stock and raised their price target from $165 to $190, potentially representing a nearly 40% upside from current levels. suggests.
Analysts also raised their expected earnings per share (EPS) estimates for 2025 and 2026 by 13% and 20%, respectively.
BofA says NVIDIA, with an 80-85% market share, is poised to capture a “generational opportunity” in a total addressable market (TAM) of more than $400 billion, a significant increase from current projections. That's what I think.
This bullish outlook is further reinforced by recent industry developments, including a strong report from TSMC, AMD's AI event, and strong demand for Nvidia's Blackwell chips.
Additionally, analysts highlight Nvidia's often undervalued enterprise partnerships and its software products with companies such as Accenture (NYSE:), ServiceNow (NYSE:), and Oracle (NYSE:).
“NVDA's work spans multiple industries, and services such as AI Foundry, AI Hub, and NIM are critical levers for AI leadership, not only on the hardware side but also on the systems/ecosystem side. ” they state.
The BofA team also highlighted Nvidia's strong free cash flow (FCF) and expects it to maintain margins of 45% to 50%, nearly double that of the Magnificent Seven tech giants. However, this suggests that this financial strength is still undervalued by the market.
Citi unveils Negative Catalyst Watch Qualcomm
Qualcomm (NASDAQ:) fell earlier this week after Citi analysts placed the company on negative catalyst watch, citing weak device demand and other headwinds.
The company expressed concern about declining demand in both the PC and wireless sectors, which account for 38% of the total semiconductor market.
“There is also excess inventory in the mobile handset market (17% of quasi-demand), which could create headwinds for Qualcomm,” Citi said in a note, adding that it could pose challenges for the company in the coming quarters. suggests.
The company warned that these headwinds could lead to a downward revision of Qualcomm's earnings forecast for the fiscal year ending December. Additionally, the potential loss of Apple (NASDAQ:) as a customer starting in 2025 was highlighted as another risk to the company's outlook.
Reflecting concerns about the possibility of a downward revision of earnings forecasts, Citi analysts wrote, “We are negative on QCOM due to Apple's withdrawal from 2025 and the expected downward revision of earnings estimates.'' “We have started a Catalyst Watch.”
Citi's own estimates for Qualcomm's December quarter are 11% below current consensus. The broader semiconductor sector also faces challenges, and Citi expects a lackluster third-quarter results.
“We expect aggregate consensus estimates to decline during the third-quarter 2024 earnings season,” they said, citing weaker demand in the PC and wireless markets and deteriorating conditions in the automotive sector.
While AI demand remains a strength for the semiconductor industry, Citi maintains a more cautious outlook for the remainder of 2024.
Wedbush says the race to a $4 trillion market cap has begun.
Analysts at Wedbush said the race among Big Tech companies to reach a $4 trillion market cap is underway between Nvidia, Apple and Microsoft (NASDAQ:).
In a note released Wednesday, the investment firm said this race is “front and center” with these three giants vying for the milestone over the next six to nine months.
“The AI revolution starts with Nvidia. In our view, the AI party has just begun. The 9:00 PM to 9:30 PM party now runs until 4:00 AM, and the rest of the tech industry is joining Apple. , and the consumer party is also starting.'' The AI wave with iPhone 16. ”
The investment firm said Nvidia's lead in AI-driven data center spending remains significant, noting that “data center AI-driven spending is the only game in the game where all GPUs that run generated AI applications go through Nvidia. “Pace is everything.” ”
Wedbush considers Nvidia and Microsoft to be the “first spin-offs” of the AI wave, and other companies are starting to get into the space.
After a visit to Asia and research across the region, the company expressed increasing confidence in its AI demand theory and predicted significant growth in AI infrastructure over the next 12 to 18 months. We predict that the AI infrastructure market could expand tenfold by 2027 due to significant capital investment in this area.
Wedbush analysts estimate that AI-related capital spending will reach $1 trillion over the next three years, setting the stage for what they call the “next generation AI foundation.”
“In short, we believe the tech bull market has just entered its next phase driven by the AI revolution, and tech stocks are poised for another 20% rally in 2025,” they said.
HSBC raises TSMC price target
Earlier this week, HSBC analysts increased their price target on Taiwan Semiconductor Manufacturing Co., Ltd. (NYSE:) from NT$1,535.00 to NT$1,600.00 while maintaining a Buy rating.
Although capital spending (capex) in fiscal year 2024 (FY24) will decline, HSBC reiterated its forecast for FY25 capital investment to be $39 billion.
The bank expects TSMC's 2nm technology to become profitable in the second half of FY25, citing over 30% average selling price (ASP) premium for 2nm chips compared to 3nm and stronger customer engagement for 2nm. I expect it to start contributing.
It also expects the 2nm utilization rate to be “even higher than the initial 3nm utilization rate,” which is expected to increase TSMC's gross profit in FY25 and FY26.
TSMC's 2nm chip revenue is expected to reach NT$568 billion in fiscal 2026, the first full year of its contribution, about 40% higher than the current consensus forecast. In comparison, 3nm chips are expected to generate NT$160 billion in 2023, their first full year.
As a result of these forecasts, HSBC analysts now forecast TSMC's gross profit from FY24 to FY26 to be 55.8%, 59.2% and 60.1%, respectively, compared to previous forecasts of 54.7%, 57.1% and 57.2%. revised upward to %.
Cisco upgrades with Citi to Buy
Citi analysts upgraded Cisco Systems, Inc. (NASDAQ:) from “neutral” to “buy,” citing an increasing likelihood of a boost from the company's AI business.
In a note to customers released Wednesday, the company said that although AI currently only accounts for about 2% of Cisco's revenue, the company will benefit from the increased use of Ethernet switches in AI-driven graphics processing equipment. He emphasized that he was well prepared.
As a leading supplier of Ethernet switches essential to connecting devices such as computers, routers and servers, Cisco is expected to play a key role in the expanding AI market.
Citi analysts have revised their forecasts and now estimate that Ethernet will capture a “high-40s percentage” share of the $10 billion AI switch market, up from their previous estimate of a “low-40s percentage.” . It also expects this market to grow “more rapidly” by 2026, with Ethernet accounting for more than half of the market share.
Cisco forecasts an additional $1 billion in AI-related orders this year and expects the hyperscalar AI sector could reach $9 billion by 2027, driven in part by increased Ethernet adoption. Masu. Analysts said the forecast could have increased as well.
“We believe more AI will benefit Cisco's revenue and valuation gap.” [versus] Networking friends,” they wrote.
Analysts currently value Cisco's 2026 earnings per share at 15x to 16x, placing Cisco's AI opportunities ahead of its networking peers, which trade at around 25x. It argues that this means the company's share price is “not cheap” by comparison. Future earnings.
