Investing.com — Here are analysts' biggest trends in the artificial intelligence (AI) space this week.
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NVIDIA (NASDAQ:) shares downgraded by New Street Research
Analysts at New Street Research downgraded Nvidia to “neutral” from “buy” on Friday.
The research firm said in a client note that current consensus estimates call for GPU revenue to grow 35% in 2025, which is in line with the company's previous forecast. The analysts see “limited further upside based on what we're hearing from across the value chain.”
“Today, we downgraded the stock to Neutral as the upside potential would only materialize in a bullish scenario of significant outlook expansion beyond 2025, which we do not yet have confidence will come to fruition.”
New Street highlighted that while consensus expects revenue growth to slow to the mid-teens, growth could be at risk due to potential cuts in hyperscale capital spending and increased competition from ASICs and AMD (NASDAQ:).
Without a change in outlook, analysts say they don't see the stock rising further, and they warned there is a risk of the shares falling as they currently trade at 40 times next 12 months' earnings per share (NTM EPS) after dipping to 20 times when growth slowed to 10% in 2019, before recovering to 35 times.
New Street values Nvidia at 35 times earnings, in line with the multiples seen in late 2019 and early 2020. EPS of $4.10 in 2027 is expected, with a 2026 price target of $143, suggesting limited upside potential over the next two years.
New Street set a one-year price target for NVDA at $135.
“Nonetheless, the quality of the franchise remains strong and we would be a buyer again, but only if the share price remains underperforming for an extended period of time,” the analysts wrote.
UBS downgrades Pure Storage (NYSE:) to sell, saying 'AI is overvalued'
Shares of all-flash data storage solutions provider Pure Storage were downgraded to sell from neutral by UBS earlier this week.
The investment bank highlighted the stock's unfavorable risk/reward balance due to slowing growth, declining market share, high valuation and “overvaluation of AI.”
Analysts expect PSTG's growth rate to slow to about 8% over the next five years from 16% over the past five years. They expect the company's all-flash storage market share to stabilize at around 15%. UBS's fiscal 2026 and 2027 revenue forecasts are 6% and 10% below consensus estimates, respectively.
The downgrade also reflects a decline in market share, with Pure's share of the all-flash storage market falling about 80 basis points over the past 12 months to 14.5% as competitors such as NetApp's (NASDAQ:) C-Series gain traction among enterprise customers.
UBS further noted that the company's shares have risen about 83% year to date, compared with the company's 15% gain, despite a 1% decline in earnings forecasts for fiscal 2025 and 2026.
Finally, the analyst noted that while investments in AI infrastructure have boosted PSTG's valuation, “AI-related storage spending has grown slower than the market expected and is likely to be more tied to inference, a slower-growing market than training.”
Dell is a new top pick at BofA
Bank of America analysts included Dell on its “US 1 List,” a selection of the bank's top investment ideas.
Bank of America raised its price target on Dell shares to $180 from $130 in a client note, citing the company's bright outlook through 2025. The bank highlighted factors including demand for AI servers and expected storage demand. IBM (NYSE:) Demand from mainframe refresh and anticipated PC refresh.
“At Dell Technologies (NYSE:) World 2024 taking place May 20-23, Dell unveiled the Dell AI Factory, expanding its AI portfolio with five new AI-PCs, all-flash file storage, network architecture and AI service offerings,” the BofA team said.
“We believe these new products will support Dell's growth in the C25,” he added.
The brokerage also said the possibility of Dell being added to the S&P 500 would be another catalyst for the company's shares.
Mizuho: Amazon (NASDAQ:) is nearing a tipping point for AI
In a note this week, Mizuho analysts said Amazon is approaching a critical tipping point on AI, citing recent customer research with a major channel partner.
The survey uncovered several trends that suggest the growth of Amazon Web Services (AWS) is accelerating.
“We expect the sales cycle to accelerate due to increased demand from the ECB meeting and the gradual exit of data center contracts,” the note said. AWS' sales cycle has accelerated as companies are finalizing proposals to exit data centers and making upfront payments.
While infrastructure spending remains dominant, Mizuho said, “cost optimization is being offset by new services such as app monitoring, chatbot deployments, and large-scale migration programs.” The shift signals a shift toward higher-value services on AWS.
According to Mizuho, the most exciting development has been the progress being made on the generative AI project.
“Our research shows that external-facing models (20% of the total) are only six months away from commercial deployment,” the memo said, suggesting that there may be a surge in inference activity as these models are deployed to a large external customer base.
BofA raises PT for European semiconductor stocks
Bank of America raised its price targets for several European chipmakers on continued strength in AI demand.
The bank's analysts raised their price targets for several semiconductor equipment (semi-cap) and subsystem suppliers, including Nokia (HE:), Nordic Semiconductor (OL:), Technoprobe and Comet.
Nokia's price target increased to EUR 3.96 from EUR 3.58 to reflect the “AI option.” Nordic Semiconductor's price target increased to NOK 169 from NOK 161, supported by improving final demand and estimate hikes. Technoprobe's price target increased to EUR 10.60 from EUR 9.40 due to its unique AI exposure. Comet's price target increased to CHF 448 from CHF 409.
However, Bank of America lowered its target price for Aixtron to €20.5 from €25 due to weakening expectations for gallium nitride (GaN), silicon carbide (SiC) and microLEDs.
ASML (AS:) remains Bank of America's top choice in semiconductors due to the increasingly intense lithography required for AI chips.
