Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Nvidia stock: Next stop is $160-170, says Mizuho analyst
Jordan Klein, a tech desk sector strategist at Mizuho (NYSE:MFG) maintains a positive outlook for Nvidia (NASDAQ:NVDA), expecting the company’s management to deliver a highly optimistic perspective during investor sessions at the CES conference in early January.
Mizuho projects NVIDIA’s stock could climb to the $160-$170 range ahead of the GPU Technology Conference (GTC) in March, where the company is set to unveil its new product, Rubin.
“All agree that NVDA sets up well to go on another run to new all-time highs in Q125 into Feb earnings date and GTC in March,” Klein wrote.
“View is that NVDA mgmt. will reinforce a very bullish view at investor meetings during CES in early Jan. I get sense some think Next (LON:NXT) stop NVDA is $160-170 level into GTC and the big preview of Rubin. I can feel the NVDA – AMD pair trade being sized up already,” he added.
Morgan Stanley names 3 reasons why Apple stock is Top Pick for 2025
Morgan Stanley (NYSE:MS) analysts reaffirmed Apple (NASDAQ:AAPL) as their top pick for 2025, highlighting three key catalysts supporting their optimistic outlook.
The first driver is the potential impact of Apple Intelligence, the company’s AI initiative, on iPhone replacement cycles. While current iPhone demand remains muted, Morgan Stanley sees broader availability of Apple Intelligence in fiscal 2025 sparking a surge in demand.
The firm forecasts iPhone shipments to grow 12% year-over-year to 258 million units in fiscal 2026, fueled by features such as enhanced Siri, AI image tools, and ChatGPT integration. “A relatively moderate replacement cycle contraction of just 0.3 years off an all-time replacement cycle high of ~5 years” is expected, according to analysts led by Erik W. Woodring.
The second catalyst is sustained double-digit growth in Apple’s services segment, underpinned by pricing power, broader adoption, and new offerings. Morgan Stanley projects an 11.4% compound annual growth rate in services revenue through fiscal 2027, exceeding consensus expectations.
The report highlights that less than half of Apple’s user base currently subscribes to services. Combined with mid-single-digit annual growth in the installed base and pricing adjustments, annual services growth could gain an additional six percentage points.
Finally, Morgan Stanley anticipates steady gross margin expansion over the next three years, driven by a favorable revenue mix, cost efficiencies, and the faster growth of services revenue.
While memory costs have risen, the analysts highlight “an emerging cyclical tailwind in 2025” as memory prices stabilize. They estimate annual gross margin growth of 50 basis points through fiscal 2027.
Mizuho lifts Amazon price target on GenAI opportunity
Meanwhile, Mizuho raised its price target for Amazon.com (NASDAQ:AMZN) to $260 from $240, highlighting the growing potential of generative AI (GenAI) applications as a key growth driver.
The firm pointed to innovations showcased at the AWS re:Invent 2024 conference, which aim to overcome barriers in deploying GenAI solutions and pave the way for significant growth in fiscal 2025.
According to Mizuho, AWS’s efforts are centered on three areas: cost reduction, simplified application development, and advanced AI-agent functionalities.
AWS’s new Trainium2 chip, which reduces capacity costs by 40%, is expected to provide a cost-effective solution for scaling GenAI. Mizuho also emphasized the Bedrock platform’s ability to streamline coding, data integration, and model selection, enabling faster application development.
Further, AWS is advancing AI-agent workflows in areas like loan underwriting, using foundational models with enhanced reasoning and context processing capabilities. These developments are expected to drive GenAI adoption across industries.
“With use-cases moving into production, we expect inferencing volume should accelerate through application development and usage in FY25, affirming our thesis of Gen-AI’s consumption multiplier effect,” Mizuho wrote.
In turn, the firm has increased its FY25 AWS revenue growth forecast to 21%, up from 19%.
BofA downgrades AMD amid AI competition, PC market slowdown
Earlier this week, Bank of America downgraded Advanced Micro Devices (NASDAQ:AMD) stock to Neutral from Buy, citing risks to its 2025 outlook.
The firm also cut its price target for AMD to $155 from $180 and reduced its 2025/26 earnings per share (EPS) projections by 6% and 8%, noting a 13-23% gap compared to consensus estimates.
Two key factors underpin BofA’s cautious view. The first is competitive pressure in the AI market, particularly from NVIDIA and custom chipmakers like Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO), which could constrain AMD’s market share growth.
“Recently largest cloud customer, Amazon strongly indicated its preference for alternative custom (Trainium/ MRVL) and NVDA products, but a lack of strong demand for AMD,” adding that other major cloud providers, such as Google (NASDAQ:GOOGL), show similar preferences.
BofA estimates AMD will hold just 4% of the $200 billion AI accelerator market in 2025, a sharp contrast to NVIDIA’s dominant 80%+ share.
The second concern is a potential slowdown in the PC processor market in early 2025. After a robust 40% half-on-half increase in AMD’s client PC sales in late 2024, BofA expects the market could soften, putting pressure on the company’s growth trajectory.
On the other hand, BofA acknowledged AMD’s strong execution and ability to benefit from Intel’s restructuring, which could open doors for greater market share in PC and server CPUs.
The report also highlighted AMD’s solid relationships with Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Oracle (NYSE:ORCL) as positives but noted limited opportunities for the company to exceed Street expectations in the AI segment.
TD Cowen cuts Adobe to Hold after results
Following weaker-than-expected fourth-quarter earnings on Wednesday, TD Cowen downgraded Adobe (NASDAQ:ADBE) from Buy to Hold and lowered its price target from $625 to $550.
The firm highlighted several challenges that could weigh on Adobe’s growth prospects, including a slowdown in growth trends and potential disruptions related to changes in its go-to-market (GTM) strategy.
Adobe reported fourth-quarter net new annualized recurring revenue (ARR) of $578 million, representing a 2% year-over-year increase. While this exceeded guidance by about 5%, it fell short of the average beat over the trailing twelve months.
For fiscal 2025, Adobe’s growth guidance of 8-10%—including a 50-75 basis points headwind from foreign exchange—came in below the Street’s expectation of 11%. Moreover, management forecasts a 50 basis points decline in operating margin, contrary to the flat margin projected by analysts. ARR growth is also expected to slow, decelerating from 13% to 11%.
TD Cowen also notes that Adobe is prioritizing the adoption of AI technologies over immediate monetization. While some AI-driven initiatives, such as GenStudio for enterprises and the AI Assistant in Acrobat, are gaining traction, they currently represent a small portion of revenue.
Looking ahead, analysts see multiple headwinds for Adobe in 2025. These include the waning of pricing tailwinds in the first half of the year, potential disruptions from GTM changes in the first quarter, and indications of weaker growth trends based on partner checks.
