5 Massive Moves from AI Analysts: Nvidia Downgraded for ‘Limited Further Upside Potential’

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5 Massive Moves from AI Analysts: Nvidia Downgraded for ‘Limited Further Upside Potential’

Investing.com — Here are the biggest moves by artificial intelligence (AI) analysts this week.

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New Street Research lowers Nvidia (NASDAQ:) stock price

New Street Research analysts lowered their recommendation for Nvidia from Buy to Neutral on Friday.

In a note to clients, the research firm said the current consensus expectation is for GPU revenue to grow 35% in 2025, matching its previous forecast. The analysts said they see “limited further growth based on what we’re hearing from the value chain.”

“Today, we are downgrading the stock to Neutral as the gains will only materialize in a growth scenario in which the outlook for the period after 2025 improves significantly, and we are not yet convinced that this scenario will materialize.”

New Street stressed that the consensus predicts a slowdown in revenue growth to the mid-teens, which may be at risk due to potential reductions in capital expenditure on hyperscale solutions and growing competition from ASICs and AMD (NASDAQ:).

Analysts indicated they do not see the stock rising further without a change in outlook. They warned of the risk of a potential downside, noting that the stock is currently trading at 40x trailing-twelve-month earnings per share (NTM EPS), down from a low of 20x as growth slowed to 10% in 2019 before rebounding to 35x.

New Street values ​​Nvidia at 35x earnings, which is in line with the multiple seen in delayed 2019 and early 2020. With estimated earnings per share of $4.1 in 2027, this translates to a price target of $143 in 2026, suggesting restricted upside potential over the next two years.

New Street set a one-year price target on NVDA shares of $135.

“The quality of the franchise is, however, intact and we would be happy to buy it, but only in the event of prolonged weakness,” the analysts wrote.

UBS Cuts Pure Storage (NYSE:) Share Price to Sell, ‘A.I. Overemphasis’

All-flash storage solutions provider Pure Storage saw its stock downgraded from Neutral to Sell by UBS earlier this week.

The investment bank highlighted the stock’s unfavourable risk-reward profile, citing slowing growth, dwindling market share, high valuation and “overemphasis on AI”.

Analysts forecast PSTG growth to tardy to about 8% over the next five years, down from 16% over the past five years. They expect the company’s share of the all-flash storage market to stabilize at about 15%. UBS’s revenue forecasts for fiscal 2026 and 2027 are 6% and 10% below consensus, respectively.

The downgrade also reflects a loss of market share – Pure’s share of the all-flash storage market has declined by about 80 basis points to 14.5% over the past twelve months as competitors such as NetApp’s (NASDAQ:) C-Series gain ground among enterprise customers.

In addition, UBS saw its shares rise significantly, up around 83% year-to-date, compared with a 15% gain for the stock, despite a 1% decline in revenue expectations for fiscal years 2025 and 2026.

Finally, the analysts mentioned that while AI infrastructure investments have boosted PSTG’s valuation, “AI-related storage spending is likely to be slower than the market expects and more closely tied to inference, a slower growth market than training.”

Dell is the recent top choice at BofA

Bank of America analysts have added Dell to their US 1 list of the bank’s best investment ideas.

In a note to clients, Bank of America raised its price target on Dell shares from $130 to $180, citing a positive outlook for the company heading into 2025. The bank highlighted factors such as AI server demand, storage demand from the expected IBM (NYSE:) mainframe refresh and demand from the expected PC refresh.

“Dell Technologies (NYSE:) World 2024 took place May 20-23, where Dell introduced the Dell AI Factory and expanded its AI offering with 5 new AI-PCs, all-flash storage, networking architecture and AI services,” notes the BofA team.

“We see these new products supporting Dell’s growth in C25,” it added.

The brokerage firm also mentioned that Dell’s potential inclusion in the S&P 500 index is another catalyst for the stock’s rally.

Mizuho: Amazon (NASDAQ:) Nears AI Tipping Point

Mizuho analysts wrote in a note this week that Amazon is close to reaching a key inflection point in AI, citing a recent customer survey conducted by a major channel partner.

The study identified several trends that suggest accelerated growth for Amazon Web Services (AWS).

“We see an accelerated sales cycle due to increased demand for ECB meetings and the gradual retirement of data center contracts,” the note reads. Enterprises are finalizing proposals and prepaying contracts to exit data centers, which is accelerating AWS’s sales cycle.

While infrastructure spending remains dominant, Mizuho said that “cost optimizations are being offset by new services such as application monitoring, chatbot deployments, and large migration programs,” a shift that signals a shift toward higher-value services at AWS.

According to Mizuho, ​​the most exhilarating development is the progress made in generative AI projects.

“The study shows that it will take 6 months for externally-facing models (20% of the total) to be commercially deployed,” the note reads, suggesting a potential augment in inference activity once these models are deployed to a huge number of external customers.

BofA raises PT on European chip stocks

Bank of America raised its price targets for several European chipmakers, driven by continued growing demand for artificial intelligence.

The bank’s analysts raised their targets for several suppliers of semiconductor capital equipment (semicap) and subsystems, including Nokia (HE:), Nordic Semiconductor (OL:), Technoprobe and Comet.

Nokia’s target is now EUR3.96, up from EUR3.58, reflecting “AI optionality”. Nordic Semiconductor’s target was raised to NOK169 from NOK161, supported by improving end demand and higher estimates. Technoprobe’s target was set at EUR10.60, up from EUR9.40, due to its unique AI exposure. Comet’s target was raised to CHF448 from CHF409.

However, BofA lowered Aixtron’s target from €25 to €20.50 due to lower expectations for gallium nitride (GaN), silicon carbide (SiC) and MicroLED.

ASML (AS:) remains the primary choice for BofA semi-caps due to the increased lithography intensity needed for AI ICs.


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