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5 big analyst AI moves: AI market is not a bubble yet, says Goldman

Published 03/17/2024, 07:43 AM
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Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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Wedbush raises Nvidia PT to $1,000 ahead of GTC

An equity analyst at Wedbush, hiked the target price on Nvidia (NASDAQ:NVDA) stock from $850 to $1,000 ahead of the company’s global artificial intelligence conference (GTC) next week.

He believes the news flow could serve as a near-term positive catalyst for NVDA “in addition to continued inputs suggesting end demand for NVDA’s AI products remains robust.”

This outlook is supported by Oracle's (NYSE:ORCL) recent comments, which highlight not only a healthy demand for cloud services but also its anticipated capital expenditure plans for the current quarter and the fiscal year 2025, the analyst said.

As for the conference itself, Bryson is anticipating insights into several developments, including Nvidia’s new Blackwell architecture.

“We expect NVDA’s new Blackwell architecture will provide significant performance gains vs. Hopper. As a reminder, NVDA presented the H100 as delivering up to 9X faster training and 30X faster inference performance vs. the A100,” he wrote.

Goldman Sachs: AI not yet in a bubble

The relentless rally in NVDA and other frontrunners of the ongoing AI boom has sparked speculation among market participants about whether the market is in a bubble.

During the week, Goldman Sachs analysts released a note addressing this matter, where they pointed out that while optimism around AI is surging in the U.S. stock market, it hasn't yet reached the peaks of the Tech Bubble or the immediate post-COVID-19 period.

Analysts highlighted that their revised long-term growth rate estimate now stands at 11%, up from the usual 9% but still lower than the 16% seen during the Tech Bubble and 13% in late 2021.

For the top ten Technology, Media, and Telecom (TMT) stocks, the expected third-year earnings growth is 15%, slightly above the S&P 500's median of 11% but not as high as the 24% in March 2000 or 18% in October 2021.

“Third, the valuation of the largest 10 TMT stocks equals 28x, which pales in comparison to the peak of the Tech Bubble (52x) and late 2021 (43x),” they added.

Citi reveals investors’ favorite and least favorite AI stocks

Earlier in the week, Citi Research analysts said they spent the last several weeks meeting investors, who have revealed their most and least favorite stocks in the AI sector.

Among those most preferred were Nvidia, AMD (NASDAQ:AMD), and Broadcom (NASDAQ:AVGO), as well as companies in the equipment sector and NXP Semiconductors (NASDAQ:NXPI).

Conversely, the most disliked stocks were identified as Micron Technology (NASDAQ:MU), along with ON Semiconductor (NASDAQ:ON) and Microchip Technology (NASDAQ:MCHP).

“There were also many questions on whether AI is a bubble and how long semi stocks can sustain these valuations,” Citi analysts noted.

“We believe this is one of the rare times it’s different and 2024 is shaping up to be a repeat of 1999. We came away with more conviction on our top pick Micron and more worried on analog stocks like ADI/MCHP.”

Meanwhile, Citi also addressed investor concerns about a potential AI bubble, stating it likely is a bubble but one that “could last into 2025.”

“We would note that these bubbles can last a year or longer, similar to what happened in 1999 with the tech bubble,” they said.

BofA lifts Super Micro PT amid AI server sector growth

Bank of America analysts raised their price objective on AI darling Super Micro from $1,040 to $1,280, citing higher expectations for AI server industry growth.

“We now expect industry revenues to grow from about $39bn to about $200bn between 2023-2027,” analysts said in a Wednesday note.

BofA’s team has noted that SMCI's competitive strengths lie in its building block architecture, which facilitates rapid integration of new technology, thereby reducing the time to market.

They further highlighted SMCI's partnerships with leading AI CPU/GPU/ASIC manufacturers such as Intel (NASDAQ:INTC), Nvidia, and AMD.

Moreover, the AI server maker’s capacity to tailor configurations to the precise needs of customer applications, along with its liquid cooling solutions, were also identified as key advantages.

Citi initiates PureStorage at Buy

Citi Research analysts initiated coverage on Pure Storage (NYSE:PSTG) with a Buy rating and a target price of $65.

The Wall Street giant sees the company as a “leading beneficiary of AI-induced transition to flash-based storage.”

The upward revision comes despite concerns caused by Meta’s transition from using PSTG's externally sourced storage hardware to an in-house designed hardware strategy.

“We believe shares have been impacted recently by a technical blog suggesting Meta (NASDAQ:META) is shifting away from external solutions (like Pure’s) that were incorporated in prior research clusters,” said a Citi analyst.

Still, Pure Storage's competitive pricing – compared to SSD and HDD options – and its recent victories in AI-related projects put it in a favorable position.

As a company specializing solely in all-flash technology, PureStorage finds itself in the most rapidly expanding segment of the external storage market, analysts highlighted.

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