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5 big analyst AI moves: ASML receives new Street-high price target, HPE upgraded

Published 06/09/2024, 04:50 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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Evercore: Nvidia stock split could be a catalyst for volatility

Nvidia's (NASDAQ:NVDA) stock will begin trading on Monday on a split-adjusted basis, and according to Evercore analysts, the 10-for-1 split could act as a potential catalyst for increased market volatility.

Following Nvidia’s earnings report on May 22, which included the announcement of the stock split effective June 10, Nvidia shares surged by 20.9% over four sessions while the S&P 500 index dropped by 0.75%. Evercore’s team said this divergence in performance between the pair had "no precedent whatsoever."

The investment firm pointed out that similar past events also resulted in notable momentum shifts and higher volatility. One such “extreme” episode happened on August 31, 2020, amid Apple (NASDAQ:AAPL) and Tesla’s stock splits, when a similarly strong Nasdaq 100-led market rally. Analysts said the momentum shifts around the split-effective dates were substantial.

“The result in late 2020 was increased downside, market volatility, and a rotation of leadership from NDX/Growth to Small Cap stocks,” they wrote.

Now, with the potential for Nvidia’s June 10 split to “shift the narrative” along with other catalysts such as new jobs report, CPI and FOMC data, and the Trump sentencing, Evercore advised investors to brace for higher volatility.

Bank of America hikes ASML stock price target to a Street high

Bank of America analysts on Thursday raised their price target on ASML (NASDAQ:ASML) to a new Wall Street high of €1,302, saying they are growing more confident that the European semiconductor giant can achieve €40 billion in revenue by 2025.

ASML, which is also a Top Pick at BofA, was described as a "critical enabler" of the AI infrastructure buildout.

BofA increased its calendar year 2025 and 2026 revenue and EPS estimates for ASML by around 6% to 9%, reflecting "higher confidence in higher demand for EUV tools as well as higher GM."

"Our new CY25/26E revenue estimates are 10-7% above css while our EPS ests are 15-9% above css," BofA analysts wrote.

"ASML remains our top pick in EU Semicaps,” they added.

BofA acknowledged concerns about foundry orders through year-end but believes that investment from leading hyperscalers and enterprise customers in AI infrastructure signals a clear need for significant capacity additions at the leading edge.

Argus upgrades HPE to Buy on growing opportunity in AI space

Analysts at Argus Research upped their rating on HP (NYSE:HPQ) Enterprise stock from Hold to Buy, setting a price target of $26.

The investment firm cited the company's strong positioning and growing opportunity in the AI space as key factors for the upgrade.

Hewlett Packard Enterprise (NYSE:HPE), an edge-to-cloud solutions provider, exceeded consensus revenue and non-GAAP earnings per share (EPS) estimates for fiscal Q1 2024 and offered positive forward guidance.

Argus analysts said HPE continues to generate strong revenue from AI servers, and its overall compute business is now showing signs of recovery. Cumulative AI systems and services orders totaled $4.6 billion as of mid-year fiscal 2024.

“Although HPE continues to anticipate a low double-digit year over year decline in FY24 earnings, the company expects to grow revenue and, in our view, is positioned for sales and profit growth ahead,” they wrote.

Deutsche Bank lifts Adobe price target despite underwhelming GenAI monetization

Also this week, design software maker Adobe (NASDAQ:ADBE) received a vote of confidence among Deustche Bank analysts, who reiterated their Buy rating on the stock and hiked the price target to $650.

They note that Adobe is heading into its Q2 earnings on June 13th, with the stock currently under pressure due to competitive concerns and underwhelming near-term generative AI (genAI) monetization.

“We expect some DM NNARR [Developed Markets Net New Annual Recurring Revenue] outperformance, with F2Q estimates currently subseasonal, though have less conviction around the magnitude of upside given pricing noise and lack of Generative Credit monetization,” the bank’s analysts said.

“We expect investors will key in on commentary around ex-pricing NNARR growth to get a sense of underlying momentum given y/y net pricing headwinds remain in F2Q,” they added.

Deutsche also pointed out early positive momentum in Express for Enterprise and the strong early growth in monthly active users (MAUs) for the recently released Express mobile app with Firefly, which supports the expansion of Adobe's top-of-funnel efforts.

Despite this, the bank does not expect significant contributions from generative credit packs until more consumption-heavy generative models, such as 3-D, Video, and Animation, become widely available.

BofA: Semiconductor industry set for multi-year growth as AI boom marches on

Bank of America is predicting a multi-year boom for the semiconductor industry, fueled by surging demand for AI. Observations from Computex, a tech trade event, pointed to a global push towards AI across various sectors, BofA analysts noted.

"We see the semiconductor industry is set for multi-year growth, with the tech titans being all in for AI at Computex," they said.

The bank noted AI's increasing presence in data centers, edge computing, PCs, and smartphones, necessitating larger semiconductor dies to handle the growing data and processing power. The rapid pace of innovation supports this demand, as evidenced by AMD's (NASDAQ:AMD) and NVIDIA's annual product development cycles.

Moreover, BofA also highlighted ARM's projection of a substantial surge in AI-ready devices, anticipating over 100 billion ARM units capable of running AI by the end of 2025.

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