Investing.com — Here are analysts' biggest trends in the artificial intelligence (AI) space this week.
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“AI stands for Apple Intelligence”: District Attorney Davidson upgrades Apple rating to “buy”
Analysts at asset management firm DA Davidson upgraded Apple (NASDAQ:) shares to Buy from Neutral this week after the iPhone maker unveiled its long-awaited AI strategy.
According to the analyst, “AI now stands for Apple Intelligence,” which is the name of the company's artificial intelligence platform announced at the WWDC event.
DA Davidson also raised its price target from $200 to $230.
“Another Napster-to-iTunes moment: We believe yesterday's presentation echoes one of Apple's past landmark moments – the transition of digital music from a standalone app with questionable regulatory status (i.e. Napster) to an experience integrated into existing consumer applications (i.e. iTunes),” the analysts wrote.
“We believe that integrating summarization, enhanced search, multi-modality, text generation and enhanced photo editing into the existing ecosystem will drive much broader adoption of AI than has been seen thus far,” they added.
The analysts also highlighted that Apple is the first company to introduce meaningful agent capabilities that would allow Siri and other tools to perform tasks on the user's behalf. Moreover, they stressed that Apple is uniquely positioned to offer such functionality and “may be the only company able to do so in the near future.”
Morgan Stanley favors Nvidia and Broadcom, AMD's rating downgraded
Meanwhile, AI chipmaker Advanced Micro Devices (NASDAQ:) was downgraded to equal weight from overweight by Morgan Stanley on Monday.
While the bank still supports its overall view, it believes investor expectations for AMD's AI business are too high. Morgan Stanley analysts believe that current AI expectations don't leave much room for upside, despite a recovery in the core business.
“We see limited potential for upward revisions to AI from here,” the analysts wrote.
Additionally, Morgan Stanley noted that AMD's stock looks expensive compared to other large AI companies, such as NVIDIA Corporation (NASDAQ:) and Broadcom Inc (NASDAQ:), whose AI forecasts banks have more confidence in.
Despite the downgrade, Morgan Stanley analysts still see AMD's product lineup as a strong competitor in the client and server CPU market this year.
Melius downgrades Adobe as enterprise software faces AI challenges
Earlier this week, analysts at Melius downgraded Adobe (NASDAQ:) shares from Buy to Hold with a $510 price target.
The investment firm notes that the enterprise application software sector is facing challenges from AI, drawing parallels with how on-premise hardware companies were affected by the move to the cloud in the 2010s — a trend that the firm suggests may continue for longer than expected.
Melius emphasized that AI, enabled by companies like Nvidia and major cloud platforms, is accelerating how software can be created, customized and deployed. Additionally, coding tools are making it easier for smaller, AI-first competitors to emerge.
They also point out that most SaaS companies have been increasing their prices for years, making it difficult for them to charge extra for AI, and that AI-driven productivity disrupts traditional “seat model” business approaches, signaling a possible business model shift.
“Furthermore, we see AI disrupting traditional databases as unstructured data becomes more important and useful,” the Melius analysts said. “This means that AI could have an impact on Snowflake (NYSE:) and parts of Hold-rated Oracle (NYSE:), as well as a lasting impact on Salesforce (NYSE:) and Workday (NASDAQ:) for some time to come.”
Morgan Stanley rates Broadcom as “one of the strongest AI investments”
Morgan Stanley reiterated its overweight rating on Broadcom ahead of the company's better-than-expected earnings report on Wednesday, calling the semiconductor company “one of the strongest AI investments.”
The Wall Street giant pointed to several key factors for its positive outlook, including Broadcom's growth prospects in AI, potential synergies from its acquisition of VMware (NYSE:) and a recovery in its core enterprise semiconductor business.
The bank's analysts expect Broadcom's AI revenue to grow from $4.2 billion in fiscal 2023 to $14 billion in fiscal 2025, which would account for about 39% of the company's projected semiconductor revenue.
“We expect Broadcom to easily meet, if only slightly, its AI goals,” the analysts wrote. They believe Broadcom is well-positioned to benefit from the introduction of Ethernet to AI data centers, Google's continued ramp-up of TPUs, and the addition of two new ASIC clients.
MS: Tesla could develop AI-enabled mobile phones
Tesla (NASDAQ:) could soon enter the smartphone market, according to Morgan Stanley analysts.
“The car is an extension of the phone and the phone is an extension of the car,” the Wall Street firm noted, based on discussions with auto executives and industry experts. “The line between the car and the phone is really becoming blurred,” they added.
Morgan Stanley analysts have long been looking at Tesla's potential forays into edge computing outside of automobiles, highlighting in October the concept of a mobile AI assistant as a key innovation.
The idea resurfaced after Tesla CEO Elon Musk said after Apple's WWDC that the development of such a device is “not impossible.”
“As Musk continues to further invest in his LLM/genAI efforts, such as Grok, the potential strategic and user experience overlaps become more apparent,” the analysts wrote.
Supercomputing at both the data center and edge levels is becoming increasingly important from an automotive perspective: the latest Tesla cars, with over-the-air firmware updates, have batteries with the energy equivalent of roughly 2,000 iPhones and house a liquid-cooled inference supercomputer.
Morgan Stanley asked, “What if a smartphone could harness the computing power and battery supply of a car to run AI applications?” The firm noted that edge computing and AI have highlighted challenges in integrating powerful AI-driven applications into today's smartphones, including battery life, thermal management and latency.
“Any Tesla owner will tell you how they use their smartphone as the primary key to unlock the car, as well as to run other remote applications while operating the car,” the analysts added.
