Investing.com — A look at this week’s biggest analyst moves in the artificial intelligence (AI) space.
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KeyBanc lowers Apple stock due to iPhone sales concerns
KeyBanc analysts this week downgraded Apple (NASDAQ:) from sector weight to underweight, citing concerns over sales of the company’s flagship iPhone.
Analysts led by Brandon Nispel said in a client note that demand for the lower-priced iPhone SE is “not purely additive” to overall iPhone sales, based on research conducted by the investment bank. He said that this suggests the possibility of overlap with the previous model.
Further analysis from KeyBanc shows that cell phone upgrade rates in the U.S. are “unlikely to increase further” in the short term.
While some industry watchers predict a wave of upgrades as customers take advantage of the iPhone 16’s new AI-enhanced features, Nispel’s findings paint a more mixed picture.
“According to our survey, 59% of respondents are interested in upgrading to iPhone 16, which appears to be strong,” he wrote. “However, our research also shows that among respondents who are likely or very likely to upgrade to iPhone 16, 61% are interested in iPhone SE.”
“We believe this indicates that iPhone SE sales are not increasing and may cannibalize iPhone 16 sales.”
Mr. Nispel also tempered expectations for a significant growth spurt for Apple, saying he expects “Apple’s growth rate to be the highest in three years.” [plus] The idea that big changes will take years and occur across all regions and products is too optimistic. He noted that growth of this magnitude is “rare.” […] It’s happened throughout history. ”
Additionally, Apple’s current valuation has come under scrutiny. With the stock trading at about 23 times forward earnings (a 5x premium to the index), the stock “looks expensive relative to its history and relative to its peers,” Nispel said.
Historically, Apple’s average three-year valuation has hovered around 20 times expected earnings, while the average Nasdaq premium is closer to 3 times.
Citi speaks out after buying Microsoft stock declines
Analysts at Citi suggest that Microsoft (NASDAQ:) stock’s recent pullback could present a buying opportunity, pointing to potential upside in the coming quarters.
They point out that Microsoft stock’s recent poor performance is due to significant increases in capital spending and investor concerns about Azure services and slower-than-expected growth in earnings per share (EPS).
In a note Wednesday, Citi analysts reviewed data from Microsoft’s resellers and chief information officers that showed a stable environment for the September quarter.
“The survey shows healthy levels of reseller quota achievement (the strongest year-to-date) despite some moderation in growth expectations,” they said. Some feedback from customers and partners was “more mixed,” but Citi highlighted signs of larger Microsoft 365 CoPilot deals despite overall slowing momentum in large deals. .
The Wall Street firm predicts that Microsoft’s second-quarter results could slightly beat investors’ already subdued expectations. The drop in expectations could act as a “liquidating event” and allow Microsoft to outperform key performance indicators, especially in Azure consumption growth.
Analysts expect Microsoft to maintain its full-year target of double-digit growth and reiterate its strong capital spending plans.
While Citi expects guidance for the second quarter to be broadly consistent and positive revisions likely to be limited, the company expects a more compelling tactical position from the first quarter onward. I think there is an opportunity to do so.
“We are buyers on the decline as we expect investor sentiment to become more positive quarter-over-quarter ahead of Azure’s growth and EPS growth reaccelerating in the second half,” the analysts wrote. said.
Fragmented Intel could be worth more: Northland analyst
Analysts at Northland Capital Markets believe Intel (NASDAQ:) could be worth more as a series of smaller companies than its current structure.
Intel stock has fallen more than 52% this year as the company continues to face challenges in keeping pace with competitors like Nvidia (NASDAQ:) in the AI chip manufacturing space.
“Intel products continue to lose market share and there is a lack of competitive AI products,” Northland analysts noted in a recent client report.
Intel in August announced plans to reduce capital spending by 17% from a year earlier to $21.5 billion, and released a third-quarter forecast that was lower than Wall Street expectations. The company also announced layoffs affecting more than 15% of its workforce (approximately 17,500 people) and will suspend its fourth-quarter dividend as part of a broader restructuring effort.
CEO Pat Gelsinger and Intel’s management team are reportedly considering the possibility of separating product design and manufacturing as part of a strategic review, Bloomberg News reports. .
At the same time, Qualcomm (NASDAQ:) has expressed interest in acquiring parts of Intel’s design division, potentially including its PC design business, Reuters reported.
Marvell (NASDAQ:) Technology is also eyeing Altera, Intel’s programmable chip division, as a potential acquisition target.
Despite these setbacks, Northland analysts argue that “a disjointed Intel is worth more than its current valuation.”
Gelsinger has put Intel’s foundry business at the center of his turnaround strategy. Intel’s foundry division, which recently secured Amazon (NASDAQ:) as a customer for custom AI chips, will become an independent subsidiary with its own steering committee.
Morgan Stanley is cautious about AMD
Shares of Advanced Micro Devices (NASDAQ:) fell on Tuesday after Morgan Stanley made cautious comments about the chipmaker’s AI supply chain strategy.
In a note to clients, Morgan Stanley analysts lower their 2025 CoWoS wafer reservations at Taiwan Semiconductor Manufacturing Company (TSMC) to 2025 due to uncertainty surrounding demand for MI325 processors. He pointed to AMD’s recent decision.
“AMD appears to have reduced some of its 2025 CoWoS wafer reservations at TSMC given the uncertainty surrounding MI325 demand,” the analysts said, adding that potential fluctuations in AI processor demand This suggested AMD’s conservative stance in dealing with the issue.
In contrast, Nvidia reportedly stepped in to fill newly available capacity at TSMC.
Morgan Stanley’s memo reflects a broader view of increasing competition within the AI sector, where NVIDIA is strengthening its leadership.
Furthermore, the bank said, “WPG revenue increased 25% quarter-over-quarter in the third quarter, compared to previous guidance of only 5.5% quarter-on-quarter growth,” and attributed the growth to “AMD CPU and He attributed this to an increase in business due to GPUs.
Wedbush predicts strong earnings season for technology sector
Wedbush analysts expect strong third-quarter results for the tech industry, supported by solid corporate spending and a resurgence in digital advertising.
Wedbush said a major theme this earnings season will be the next stage of the AI revolution. Major cloud players Microsoft, Google (NASDAQ:), and Amazon are expected to post strong growth, exceeding Wall Street expectations, due to the accelerated migration of workloads to the cloud.
Wedbush analysts suggest this shift will pave the way for a wide range of use cases for AI companies to be deployed by 2025.
Wedbush sees the strength of the cloud extending beyond the leading providers, including Oracle (NYSE:), SAP SE (ETR:), IBM (NYSE:), ServiceNow (NYSE:), and Dell (NYSE:) are also poised to benefit as companies increase their adoption of AI and cloud.
These companies are considered “fundamental cloud stock players” and are well-positioned to take advantage of what Wedbush calls the “secondary spinoff” of the AI movement.
“We believe 70% of the world’s workloads will be on the cloud by the end of 2025, up from less than 50% today,” the analysts said, highlighting the rapid adoption trajectory.
Wedbush remains optimistic about tech stocks, predicting they could rise 20% in 2025.
Wedbush envisions a macroeconomic “soft landing,” with Jerome Powell’s Federal Reserve likely to enter an aggressive rate-cutting phase. They stress that spending on AI represents a generational shift in technology investment, and the impact on this sector is only beginning to become apparent.
