AI Drives Market Shifts: Nvidia Soars, Microsoft Adjusts, and AI Stocks Show Promise

5 big analyst AI moves: Alibaba upgraded, Google stock price cut By Investing.com

Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week. InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today! The bank hiked its price target to $200 from $190, citing Nvidia's unique position in compute-intensive inference, agentic applications, and AI-driven robotics. "The company remains in a dominant position of leading the AI market," BofA stated, noting that Nvidia's valuation of 29x/22x estimated PE for 2025 and 2026 remains attractive, given its expected 30%+ earnings CAGR compared to the S&P 500 and other tech giants. Despite challenges such as China restrictions and the Blackwell transition, Nvidia delivered a strong fiscal Q4, with revenue surging 78% year-over-year to $39.3 billion, exceeding estimates by 3%. Looking ahead, Q1 guidance projects revenue of $43 billion, a full $1 billion above expectations, marking a 66% YoY increase. A major contributor to this growth was the stronger-than-expected demand for Blackwell chips. "FQ4 included nearly $11bn of Blackwell sales, well above the $4-$7bn expectations," BofA noted, reassuring investors about the product's successful rollout. However, higher production costs for Blackwell are expected to put slight pressure on gross margins, which are forecast to dip to 71% in Q1 from 72% in Q4 before rebounding in the second half of the year. While Nvidia shares retreated after earnings, BofA sees this as a buying opportunity. "We expect NVDA to re-energize as excitement builds for its flagship GTC tradeshow in mid-March," the analysts concluded, emphasizing that the stock remains attractively valued despite near-term AI market fatigue. Cancelling data center leases could 'foretell a sustained slowing' in Microsoft Azure: analyst Microsoft Corporation (NASDAQ:MSFT) has canceled data center leases with at least two U.S. operators and scaled back international spending plans, according to TD Cowen analysts. The cuts amount to "a couple of hundreds of megawatts," based on supply chain checks cited in a note led by Michael Elias. The company has also redirected a "considerable portion" of its planned international investment back to the U.S., signaling a possible slowdown in overseas expansion. TD Cowen also said that Microsoft has pulled back on converting signed statements of qualification into data center leases, though it remains unclear whether this represents a delay or a termination. Commenting on this, Bernstein analysts suggest these moves could "foretell a sustained slowing" in Azure's growth. Analyst Mark Moelder noted that Microsoft's decision may be tied to increasing capacity at its own data centers, reducing the need for external leases. Wolfe Research trims Google stock price target This week, Wolfe Research analyst Shweta Khajuria lowered the price target on Google owner Alphabet (NASDAQ:GOOGL) to $210 from $220 while maintaining a Peerperform rating. The adjustment follows Wolfe's in-depth analysis of its bottoms-up Search model, which evaluates the impact of query mix-shifts to AI-driven models, along with proprietary survey findings. As a result, the firm has revised down its Search revenue estimates for fiscal years 2025 and 2026. Despite the target cut, Wolfe maintains an Outperform rating based on valuation and remaining cost optimization opportunities. "Our Outperform rating is based on our long-term view that the company's scale, AI investments, category leadership position, and product catalysts should enable Alphabet to maintain digital advertising market, gain share in Cloud computing, generate new sources of revenue, and remain highly competitive in the Gen AI race," Khajuria said. "Valuation at current levels is reasonable on a growth-adjusted basis," the analyst added. Bernstein lifts Alibaba rating amid AI optimism Bernstein has upgraded Alibaba (NYSE:BABA) to Outperform from Market-Perform, citing growing confidence in AI-driven expansion within Alicloud and a more disciplined approach to capital allocation. The firm also raised its price target on the company's U.S.-listed shares to $165 from $104 and lifted its Hong Kong target to HK$161 from HK$102. "Alibaba's shares have rallied strongly since China's DeepSeek moment, as investors increasingly valued Alicloud in a SOTP calculation," Bernstein analysts wrote. While enthusiasm around AI may have temporarily cooled, Bernstein sees a more positive earnings trajectory for Alibaba, driven by strategic capital allocation and a strengthening AI market structure. A central pillar of the firm's bullish stance is Alibaba's evolving investment strategy. "A better outlet for Alibaba's investment dollars" is taking shape, with a focus on AI infrastructure rather than aggressive global e-commerce expansion, according to Bernstein. The firm estimates Alicloud must grow revenues by 25-30% in fiscal year 2026 to offset depreciation costs from its quarterly capital expenditures, which exceed RMB 30 billion. With AI offering higher margins compared to traditional cloud services, Bernstein expects Alicloud to be a strong competitor alongside Huawei and Tencent (HK:0700) in China's AI infrastructure race. Beyond AI, Alibaba's domestic e-commerce segment is also showing signs of improvement. The company's 9.4% growth in customer management revenue (CMR) during the third quarter suggests stronger monetization, supported by enhancements in ad technology and increasing Taobao commissions. "Our channel checks have pointed to improvement in the company's ad product, which should help to support CMR growth," Bernstein noted. Looking ahead, the investment bank projects revenue acceleration for Alicloud in the March and June quarters, with investors likely to buy on any stock weakness as AI growth details emerge. Equities to rebound, buy weakness in AI stocks, says UBS U.S. equities experienced a volatile week, with the S&P 500 index losing more than 2% across the past five sessions. Earlier in the week, Chinese stocks listed in the U.S. came under pressure amid concerns over new White House measures restricting Chinese investments. Investor sentiment was further weighed down by President Donald Trump's comments on potential tariffs on Canada and Mexico. Despite the market's recent volatility and uncertainty around Trump's trade policies, UBS strategists believe investors will eventually refocus on core fundamentals, which they say "should support the equity rally further." UBS continues to rate the China internet sector as Attractive, citing strong fundamentals and early AI innovation successes. The bank also expects AI-driven investments to expand significantly, forecasting a 35% rise in capital expenditures from the top four U.S. tech firms by 2025, reaching $302 billion. "With improving AI adoption trends boosting monetization, we expect mid-teens returns for global AI stocks this year using our market capitalization opportunity framework," UBS strategists noted. The firm maintains its year-end target of 6,600 for the S&P 500 and emphasizes the importance of diversification and hedging to navigate ongoing market volatility. UBS advises investors focused on long-term AI exposure to consider structured strategies or take advantage of pullbacks in high-quality AI stocks.

DeepSeek Isn't Public Yet: Here Are 5 AI Stocks To Watch Instead

DeepSeek remains private, however investors who are looking for AI stocks with strong growth potential have other stocks to consider.| Credit: Ramin Talaie/Corbis/ Getty Images Sage Group Sage Group (LSE: SGE) is a prominent player in enterprise software, specializing in accounting and payroll services. The company's integration of AI into its product suite has led to increased automation and improved analytics, driving an 80% increase in its share price over the past five years, with shares currently trading at £13.35 as of Jan. 29. The company's strategy appears to be working, evidenced by a 21% rise in underlying operating profits to £529 million and a 220 basis point increase in its margin to 22.7%. However, despite its solid performance, Sage stock remains relatively expensive, with a price-to-earnings (P/E) ratio of 42.4. Sage has also announced a share buyback program , repurchasing nearly 300,000 shares as part of its strategy to enhance shareholder value. The company also reiterated its commitment to boosting earnings per share by reducing the number of shares in circulation. Softcat Softcat (LSE: SCT) is an IT infrastructure provider offering a range of services, from software licensing to cloud computing. The company has seen impressive growth, driven by its ability to integrate innovative AI solutions. For 2024, Softcat reported a 9.3% increase in operating profit, reaching £154.1 million. With shares trading at a multiple of 26.5 times earnings, Softcat's valuation is significantly higher than the FTSE 250 average of 12.9. But it's trading lower than competitors like Sage. While the company operates in a high-growth sector, it faces risks from market saturation and the constant demand for innovation. Over the past three years, Softcat has grown its earnings per share (EPS) by 7.2% annually. While this growth rate isn't extraordinary, it indicates steady expansion. However, despite consistent EBIT margins, Softcat has experienced a dip in revenue, which raises concerns about its future growth potential. On a more positive note, Softcat's insiders have a significant stake in the company, holding 33% of shares, valued at £1.0 billion. Additionally, the CEO's compensation package, valued at £1.6 million, is below the median for similar-sized companies, suggesting alignment between management and shareholders. Twilio Twilio (NYSE: TWLO) is expanding its generative AI capabilities to enhance customer engagement. Its Customer AI technology, launched in June 2023, integrates platform data with AI and large language models (LLMs) to strengthen brand relationships. Strategic partnerships have further fueled Twilio's AI expansion. Collaborations with Google Cloud and OpenAI are enhancing its customer engagement solutions, including Twilio Flex and Twilio Engage, by integrating GPT-4 to create more personalized experiences. Twilio achieved its first-ever GAAP operating profit in the fourth quarter of 2024. Revenue rose by 11% year-over-year to $1.19 billion. The company reported a full-year revenue of $4.46 billion, up 7% from 2023, while significantly improving profitability. CEO Khozema Shipchandler credited the performance to Twilio's financial discipline and innovation, emphasizing Twilio's focus on enhancing digital engagement through AI-driven solutions. Broadcom Broadcom (NASDAQ: AVGO) has seen strong growth, fueled by rising demand for its custom AI accelerators (XPUs) and networking solutions. The company's AI connectivity revenues surged fourfold, driven by global shipments of its Tomahawk and Jericho solutions. Broadcom's chips are essential in data center infrastructure, supporting major industries. The acquisition of VMware has strengthened Broadcom's software offerings and expanded its partner network, which includes giants like Alphabet, Meta, Arista Networks and Dell Technologies. Currently, Broadcom is trading 18% below its 52-week high. For the year ending October 2025, projected revenue and earnings growth rates are 18% and 30%, respectively. In the fourth quarter of 2024, Broadcom reported revenue of $14.05 billion, up 51% year-over-year, with semiconductor revenue reaching a record $30.1 billion. AI-related revenue grew 220%, driven by demand for its AI XPUs and Ethernet networking solutions. For the full fiscal year, adjusted EBITDA rose 37% to a record $31.9 billion. Broadcom has consistently increased its dividend for 14 years, with $5.6 billion in operating cash flow in the latest quarter. The company pays a quarterly dividend of $0.59 per share, yielding 1.2%. Innodata Innodata (NASDAQ: INOD) is a global leader in data engineering with operations in the U.S., U.K., Netherlands and Canada. The company provides AI data preparation services, including data collection, annotation, and model training, and focuses on data transformation and compliance. In the third quarter of 2024, Innodata generated $30.6 million in revenue from a major tech client, contributing to an impressive 707% rise in stock price over the past year and a 50% increase in 2025 year-to-date. This growth is driven by accelerating demand for AI solutions. Innodata's financial performance reflects its strength, with 96% revenue growth in 2024, surpassing initial projections. Adjusted EBITDA surged 250% year-over-year, and the company ended the year with $46.9 million in cash. It also has a $30 million untapped credit facility. For 2025, Innodata projects 40% revenue growth , likely to be revised upwards as new opportunities emerge. The company secured an additional $24 million in annualized revenue from its largest customer, boosting its total to $135 million. With increasing AI adoption and growing partnerships in tech and enterprise sectors, Innodata is well-positioned for long-term growth . The company's strong performance, new contracts, and expanding customer base have earned it a 'strong buy' consensus rating from Wall Street . This signals confidence in its ability to capitalize on emerging AI opportunities.