Anika Begay
Vscek — Here are the top analyst moves in artificial intelligence (AI) this week.
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New Street raises Nvidia price to buy, says recent pullback offers opportunity to increase exposure
New Street Research upgraded NVIDIA Corporation (NASDAQ:) to a Buy rating with a $120 price target this week. The move comes after the chipmaker’s shares have fallen significantly since their peak in June, causing Nvidia to underperform other semiconductor stocks tied to data center AI.
“We believe the correction is overall healthy, we recognize some limited and tactical headwinds specific to Nvidia, but overall we see the stock moves as an opportunity to gain additional exposure,” the analysts said.
The recent decline in Nvidia stock has been partly attributed to reports of a potential three-month delay in the release of its Blackwell chip due to design flaws. This delay could push volume shipments to Q1 2025.
Blackwell’s design calls for two large interconnected 10 TB/s arrays using TSMC’s CoWoS-L packaging technology, which has faced startup difficulties and may require a redesign.
To address this delay, Nvidia could extend the life of its Hopper chip, which uses the more mature CoWoS-S packaging and can be manufactured more efficiently. Nvidia could also introduce a simplified version of the Blackwell chip with a single die, New Street explains.
“While it would underperform Blackwell’s dual-matrix SKUs, it would still represent an improvement over Hopper,” analysts noted.
New Street also maintains a positive view on Nvidia’s dominant position in the data center XPU market.
“We expect internal XPUs to be successful versus GPUs and to ship in millions of units in giant domestic markets,” although they acknowledge AMD (NASDAQ:) as a potential competitor.
Additionally, hyperscaler capex expectations for 2025 have increased, now forecasting 13% growth, with AI infrastructure capex set to grow at least 30%. This supports the firm’s forecast that AI semiconductor spending could grow 50% annually.
“Distant 3rd Place in Trader AI”: Mizhuo Downgrades Intel Stock
Mizuho analysts downgraded Intel Corporation (NASDAQ:) stock from Outperform to Neutral on Wednesday and changed their price target to $22 from $36.
The investment bank initially upgraded Intel to November 2023, driven by expectations of strong AI momentum and new products that would boost PC and data center traction. However, nine months later, the outlook has changed.
“We were wrong: INTC has continued to lag its peers and is losing share across all key AI/DC/PC markets through 2025E,” the analysts wrote. “We see INTC continuing to face headwinds, with execution risks across its product portfolio, and are downgrading INTC to Neutral.”
The technology gap between Intel and its competitors has widened, and while there is long-term potential for the foundry and tailwinds from 18A, regaining lost leadership will likely be a challenge, Mizuho notes.
Despite new product launches in Server (Sierra Forest/Granite Rapids), AI (Gaudi 3), and PC (Meteor Lake), Intel is losing market share in PCs and data centers, remaining “a distant third in commercial AI.” Mizuho also cited internal challenges, including staff reductions, that could impact morale and execution.
The decision to cut the dividend has further weighed on investor sentiment towards the stock, analysts said.
Bofa Cuts SMCI Stock to Neutral Amid Margin Headwinds
Earlier this week, analysts at Bank of America cut their rating on shares of Super Micro Computer (NASDAQ:) from “Buy” to “Neutral” after the company reported worse-than-expected margins for its fiscal fourth quarter.
While fourth-quarter revenue met both company and stock market estimates, gross margin of 11.3% was significantly lower than the expected 13.6%.
SMCI shares fell 20% on Wednesday.
The data center company’s revenue forecast for the first quarter of fiscal 2025 beat expectations, and its overall fiscal 2025 revenue projection of $28 billion beat the consensus estimate of $23.8 billion.
However, BofA noted that Super Micro’s gross margin is expected to gradually return to its typical range of 14-17% by the end of fiscal 2025, assuming improvements in manufacturing efficiency, improved customer mix and the launch of new platforms.
“While the long-term AI advantage remains intact, we are moving to a Neutral rating from Buy as we see the next few quarters with residual margin challenged as SMCI navigates a competitive pricing environment, with shipment delays for Blackwell GPU systems requiring liquid-cooled racks (higher margin) and ongoing issues with component availability.”
Reflecting these headwinds, they also lowered their price target on Super Micro Computer from $1,090 to $700, aligning with the broader industry trend where valuation multiples have seen a notable decline.
Wedbush: Palantir’s Collaboration With Microsoft Is ‘A Launchpad For AIP’s Story’
Palantir (NYSE:) and Microsoft Corporation (NASDAQ:) this week announced a partnership to develop an integrated technology suite for the U.S. defense and intelligence community.
This collaboration will leverage Palantir’s AI-powered platforms within Microsoft’s government and classified clouds, enabling secure cloud, AI, and analytics capabilities.
As part of the deal, Palantir will deploy its full suite of products, including Foundry, Gotham, Apollo, and AIP, on Microsoft’s cloud platforms. This will enable government agencies to build AI tools for operational and logistical purposes, with hands-on experiences to test the technology.
Additionally, Palantir will integrate Microsoft’s Azure OpenAI service into secure environments, combining cloud computing with advanced language models to support AI-driven operations in the defense and intelligence sectors.
“With this significant agreement solidified and with MSFT leveraging PLTR for AI capabilities and LLM for the U.S. government, the company can now increase the pace of AI deployment as PLTR continues to accelerate AIP adoption in the federal sector,” Wedbush analysts commented.
“We believe this will be a launching pad for the PLTR AIP story to reach the Department of Defense and the broader Beltway ecosystem over the next 12 to 18 months,” they added.
Citi Reiterates Micron as Top Pick on Strong DRAM Outlook
Semiconductor stocks have seen a sharp decline recently, driven by macroeconomic challenges and disappointing earnings that fell short of lofty expectations. The slide has been linked to slower-than-expected replenishment of analog inventories and potential risks in the automotive sector, which accounts for 14% of semiconductor demand.
However, Citi analysts remain bullish on the sector, noting that “the main reasons why we are positive, namely artificial intelligence and memory strength, remain intact.”
Despite the recent decline, Citi continues to favor Micron Technology (NASDAQ:) as the top pick in the sector. They believe “it is time to double down as the DRAM recovery should persist given the reduced capacity and better-than-expected 3Q24 DRAM pricing.”
The DRAM market is showing signs of improvement, with strong performances from major players such as Samsung (KS:) and SK Hynix.
Citi analysts have revised their forecast for DRAM prices in 2024, now expecting a 62% year-over-year increase, up from the previous estimate of 53%. This change is attributed to limited supply growth and a shift by memory manufacturers towards high-bandwidth memory (HBM).
Despite weaknesses in the automotive and industrial sectors, demand from the largest end markets (PCs, mobile phones and servers, which together account for 61% of semiconductor demand) remains relatively strong.
Micron reported that inventory levels in the traditional data center market improved in the first half of 2024 and it expects further growth in the second half.
Citi analysts also said they “expect to raise their forecasts when Micron reports earnings in September.”
Micron shares have fallen more than 30% in the past month.
