Here are the biggest artificial intelligence (AI) analyst moves for this week.
BofA sees 40% more upside in Nvidia stock
Analysts at Bank of America this week reaffirmed their Buy rating on Nvidia (NASDAQ:NVDA) stock, raising their target price from $165 to $190, suggesting a potential upside of nearly 40% from current levels.
Analysts also raised their pro forma 2025 and 2026 earnings per share (EPS) estimates by 13% and 20%, respectively.
BofA believes Nvidia, which has 80-85% market share, is poised for a “generational opportunity” in a total addressable market (TAM) of more than $400 billion, a sharp increase from current forecasts.
This bullish outlook is bolstered by recent industry developments such as TSMC’s strong report, AMD’s AI event, and strong demand for Nvidia’s Blackwell chips, among others.
Additionally, analysts point to Nvidia’s often-underrated corporate partnerships with companies such as Accenture (NYSE:ACN), ServiceNow (NYSE:NOW) and Oracle (NYSE:ORCL), as well as its software offerings.
“NVDA’s commitments span multiple verticals and offerings such as AI Foundry, AI Hubs, NIMs are key drivers for its AI leadership, not only on the hardware side but also on the systems/ecosystems side” , they noted.
The BofA team also highlights Nvidia’s strong free cash flow (FCF), which it predicts will maintain a margin of 45-50% – nearly double that of the ‘Big Seven’ tech giants – suggesting that this financial strength remains undervalued by the market.
Citi Opens Negative Catalyst Watch on Qualcomm
Qualcomm (NASDAQ:QCOM) fell earlier this week after Citi analysts put the company on negative catalyst watch, citing weaker mobile phone demand and other headwinds.
The house expressed concerns about reduced demand in both the computing and wireless networking sectors, which together account for 38% of the total semiconductor market.
In its note, Citi pointed out that “there is also excess inventory in the mobile end market (17% of semiconductor demand), which could be a counterweight to Qualcomm,” signaling potential headwinds for the company in the coming quarters.
He warned that those headwinds could lead to lower guidance for Qualcomm’s December quarter. In addition, the possible loss of Apple (NASDAQ:AAPL) as a customer from 2025 was highlighted as another risk to the company’s prospects.
“We are initiating a negative catalyst watch for QCOM given our expectations for reduced forecasts in addition to Apple exiting in 2025,” Citi analysts noted, reflecting concerns about possible downward revisions to earnings estimates.
Citi’s own estimates for Qualcomm’s December quarter are 11% below the current consensus. The broader semiconductor industry also faces challenges, with Citi predicting a lackluster third-quarter earnings period.
“We expect overall Consensus estimates to decline during the 3Q24 earnings period,” they wrote, citing cooling demand in the PC and wireless markets, as well as worsening conditions in the automotive sector.
While AI demand remains a strong point for the semiconductor industry, Citi maintains a more cautious outlook for the rest of 2024.
Wedbush says race to $4 trillion market cap is on
Analysts at Wedbush said the race among Big Tech companies to reach a market capitalization of $4 trillion. dollars between Nvidia, Apple and Microsoft (NASDAQ:MSFT) is underway.
In a note published Wednesday, the investment firm described this race as “front and center,” with these three giants competing for the milestone over the next 6-9 months.
“The AI Revolution is starting with Nvidia and in our view the AI party is just getting started as it’s 9pm/9:30pm. at a party that lasts until 4 a.m. with the rest of the tech world now joining in with Apple also ushering in the AI consumer wave with the iPhone 16.”
The investment house said Nvidia’s dominance of AI-driven data center spending remains critical, noting that “it’s all about the pace of AI-driven data center spending, as the only game in town for the GPUs that run genetic AI applications all go through Nvidia.”
Wedbush sees Nvidia and Microsoft as the “early adopters” of the AI wave, with other companies also starting to enter the space.
Following visits to Asia and audits across the region, the firm expressed growing confidence in its AI demand position, predicting strong growth in AI infrastructure over the next 12 to 18 months. He predicts that the AI infrastructure market could grow tenfold by 2027, due to significant capital spending in the sector.
Wedbush analysts estimate that $1 trillion in AI-related capital spending will grow over the next three years, setting the stage for what they call the “next-generation AI foundation.”
“In short, we believe the stage is set for tech stocks to see another 20% move higher in 2025, with this tech bull market just entering its next phase led by the AI revolution,” they said. .
HSBC raises TSMC price target
Earlier in the week, analysts at HSBC raised their price target on Taiwan Semiconductor Manufacturing (NYSE:TSM) to NT$1,600.00 from NT$1,535.00, while maintaining a Buy rating.
Despite the reduction in capital expenditure (capex) in financial year 2024 (FY24), HSBC reiterated its forecast for FY25 capital expenditure at $39bn.
The bank expects TSMC’s 2nm technology to start contributing to revenue in the second half of FY25, citing a more than 30% average selling price (ASP) premium for 2nm chips compared to 3nm, along with stronger engagement of customers for 2nm.
He also expects 2nm usage rates “to be even higher than the initial 3nm usage rate,” which is expected to boost TSMC’s gross margins in FY25 and FY26.
TSMC’s 2nm chip revenue is forecast to reach TWD$568bn in fiscal 2026, its first full year of contribution – about 40% higher than current consensus estimates. In comparison, 3nm chips are expected to generate TWD 160 billion in their first full year in 2023.
As a result of these forecasts, HSBC analysts revised upwards their estimates for TSMC’s gross profit margin for FY24 to FY26 to 55.8%, 59.2% and 60.1%, respectively, in compared to previous estimates of 54.7%, 57.1% and 57.2%.
Citi upgrades Cisco to buy
Citi analysts upgraded Cisco Systems (NASDAQ:CSCO) to ‘Buy’ from ‘Neutral’, pointing to the growing potential boost from the company’s AI business.
In a note to clients published Wednesday, they noted that while AI currently makes up only about 2 percent of Cisco’s revenue, the company is poised to benefit from the growing use of ethernet switches in AI-based graphics processing units.
As a major supplier of ethernet switches, which are essential for connecting devices such as computers, routers and servers, Cisco is expected to play a key role in the growing artificial intelligence market.
Analysts at Citi revised their forecast, estimating that ethernet will now account for a “high 40 percent” share of the $10 billion AI switching market, up from their previous forecast of a “low 40 percent.” They also expect this market to grow “faster” in 2026, with ethernet taking over half of the market share.
Cisco has forecast an additional $1 billion in AI-related orders this fiscal year and predicts the hyperscaler AI segment could reach $9 billion by 2027, in part due to increased ethernet adoption. Analysts said that forecast, too, may have been inflated.
“We see more AI to benefit Cisco’s topline, as well as its valuation gap [versus] networking peers,” they wrote.
Analysts now value Cisco at 16 times forward 2026 earnings per share, up from a previous multiple of 15 times, arguing that Cisco’s AI opportunities mean the stock “justifies a smaller discount” compared to peer networking companies, which trade about 25 times future earnings.
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Reference;
Karaahmetovic, V. (2024) 5 big analyst AI moves: Nvidia stock has 40% upside left; Cisco upgraded to Buy By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/5-big-analyst-ai-moves-nvidia-stock-has-40-upside-left-cisco-upgraded-to-buy-3671886 (Accessed: 20 October 2024).
