AI Drives Tech Industry Growth: Nvidia, Apple, and Others Poised for Strong Performance

5 big analyst AI moves: Nvidia earnings good for TSMC, Apple gets new bull-case PT 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! Phillip Securities cut its rating on NVIDIA Corporation (NASDAQ:NVDA) on Friday from Buy to Accumulate, citing recent price movements in the chipmaker's stock. The firm raised its price target for Nvidia slightly, increasing it to $160 from $155. "We downgrade [from] BUY to ACCUMULATE due to recent price movements, with a higher target price of US$160," noted analyst Yik Ban Chong. Phillip Securities highlights that Nvidia's fiscal Q3 2025 results were in line with the firm's expectations, with revenue exceeding Nvidia's guidance by 8%. Profit after tax and minority interests (PATMI) grew an impressive 109% year-over-year. In its note, the investment firm emphasized that roughly half of Nvidia's data center sales come from hyperscalers, with the remainder driven by enterprises and sovereign clients. Production of the company's Blackwell chips is expected to begin in Q4 2025, with projected revenues exceeding initial forecasts of "several billion dollars." Nvidia anticipates that the initial rollout of Blackwell will yield gross margins in the low-70% range, eventually improving to mid-70% as production scales up. While the rating downgrade reflects short-term price movement, Phillip Securities has maintained its fiscal year 2025 revenue and PATMI estimates. The firm has also raised its forecasts for fiscal year 2026 revenue and PATMI by 5% and 7%, respectively. These adjustments account for a stronger-than-expected ramp-up of Nvidia's data accelerator platforms, including Hopper and Blackwell, alongside reduced corporate tax rates. The firm also adjusted fiscal year 2026 margin assumptions, aligning with Nvidia's guidance for lower margins due to the Blackwell product launch, while keeping its weighted average cost of capital (WACC) and growth rate assumptions unchanged. Bernstein analysts suggest that Apple (NASDAQ:AAPL) shares could reach $290 in their bull case scenario. The firm regards Apple as "a quality compounder, with mid-single digit revenue growth, improving margins, disciplined capital return, and double-digit earnings per share (EPS) growth." "Given its negative cash conversion cycle, the stock is less expensive than it appears. Investors have fared well by maintaining AAPL as a core holding, and adding to positions on pullbacks," added analysts led by Toni Sacconaghi. Apple's market position is highlighted by its ecosystem of over 2.3 billion devices and nearly one billion "unique, demographically attractive users." Bernstein also identifies Apple as a key beneficiary of AI advancements in two significant ways. First, the firm anticipates an accelerated replacement cycle for Apple products, potentially beginning in fiscal year 2026. Second, they see AI integration driving new revenue streams for Apple, particularly through the distribution of large language models (LLMs) and third-party applications. "Encouragingly, given its position as a channel/platform, Apple's capex has remained low. A key question is whether AI could structurally alter iPhone's replacement cycle," the analysts noted. They also observed Apple's distinct seasonal trading patterns, cautioning that while the iPhone 16 cycle might underperform, any drop in the stock price to $200 or below -- particularly between February and April -- would represent a buying opportunity. Bernstein's bull case envisions Apple achieving $9 in EPS by fiscal year 2026, which would value the stock at $290. Nvidia's strong third-quarter performance and outlook are bolstering the positive sentiment for Taiwan Semiconductor Manufacturing (NYSE:TSM), according to Bank of America (NYSE:BAC) analysts. "The results underscore robust structural AI demand, with limited digestion periods as adoption accelerates," said analysts led by Brad Lin. They highlighted Nvidia's steady one-year cadence for data center GPU advancements, which has proven advantageous for TSMC by driving average selling price (ASP) content growth. "The continuous scaling of Al models strengthens TSMC's leading-edge node demand and industry leadership. Additionally, we are pleased to learn NVIDIA's robust GPM outlook into CY2025, which reflects the stronger value TSMC offers to clients, vs ASP hikes," the analysts added. AI demand continues to outpace supply, with Nvidia's Hopper and Blackwell GPUs facing ongoing constraints. Bank of America notes that demand for Blackwell is expected to remain above supply into fiscal 2026, spurred by significant investments in AI -- an encouraging signal for TSMC's prospects. Meanwhile, TSMC continues making efforts to address its Chip-on-Wafer-on-Substrate (CoWoS) bottlenecks by ramping up production. The company plans to expand its CoWoS capacity from 35-40,000 units per month in Q4 2024 to over 80,000 units by the end of 2025. "As AI models grow in complexity and require greater computing power, we believe TSMC is well-positioned to meet these demands," Lin and his team concluded. Shares of Super Micro Computer Inc (NASDAQ:SMCI) soared sharply this week after the AI server maker unexpectedly introduced an independent audit firm and submitted a compliance plan to NASDAQ. The move aims to prevent the company's delisting, though formal approval from NASDAQ and an extension for its 10-K filing are still pending. An analyst at Lynx Equity Strategies, however, views NASDAQ's approval as likely a "formality." In a recent note, Lynx analyst KC Rajkumar highlighted SMCI's importance in the AI data center market, stating it is "just too important a player in the AI data center space for it to be allowed to delist and go fallow." He emphasized that delisting, which would cut off access to capital, was a low-probability event, despite regulatory uncertainties. The analyst also pointed out the stock's substantial discount, setting a price target (PT) of $45. After SMCI's 8-K filing, which significantly lowers the delisting risk, Rajkumar now predicts a "vicious short-squeeze" could follow, with shares potentially reaching his price target soon. "SMCI has a leadership position in the rapidly expanding liquid-cooled GPU server data center market, a position it is unlikely to give up any time soon," Rajkumar said. Earlier in the week, Raymond James upgraded Hewlett Packard Enterprise Co (NYSE:HPE) to Strong Buy, citing optimism about the company's refined business model. The shift, which now distinctly separates AI platforms from traditional servers, led the investment bank to raise its sales estimates for fiscal year 2025. HPE is expected to deliver in-line financial results when it reports on December 6, though the federal sector could pose risks. Despite this, Raymond (NS:RYMD) James forecasts growth to accelerate in the fiscal year 2025. The firm's analysts also expect the Juniper Networks (NYSE:JNPR) acquisition to close as planned, a move that could enhance HPE's stock valuation multiple. Raymond James projects robust growth in HPE's AI server sales, increasing from $4.1 billion in fiscal year 2024 to $5.9 billion in FY25 and reaching $7.4 billion by FY26. "AI sales are mostly coming from AI model training applications, and HPE cited traction with sovereign networks," noted analysts led by Simon Leopold. They highlighted that enterprise clients, currently in the experimental phase, accounted for a mid-teens percentage of the backlog. "As enterprise adoption expands, we expect continued strong AI sales with improving margin. We include HPE within the context of an AI networking basket," the analysts added.

5 big analyst AI moves: Any Nvidia stock pullback is 'an opportunity' 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! Microsoft's first-quarter results and guidance for the current quarter have left some investors cautious, placing them in "wait-and-see mode," according to analysts at RBC Capital Markets. In its October update, Microsoft (NASDAQ:MSFT) revealed plans to increase capital expenditures to support its ongoing investments in artificial intelligence. The company has positioned itself as a leader in the AI space, fueled by the success of its Azure cloud platform and its partnership with OpenAI, the creator of ChatGPT. However, concerns persist about the significant costs associated with Microsoft's AI initiatives, including investments in data centers, high-end GPUs, and networking equipment, and whether these expenditures will yield substantial returns. Azure, a core component of Microsoft's AI and cloud strategy, delivered a 33% revenue increase in the first quarter, slightly exceeding analyst expectations of 32%. Still, the company's CFO Amy Hood warned that growth in Azure's revenue is expected to slow to 31%-32% in the second quarter. Despite this deceleration, RBC analysts foresee stronger performance ahead. They project Azure's growth will outpace second-quarter levels in the third quarter and accelerate further in the fourth quarter of Microsoft's fiscal year. This trajectory would drive second-half growth for Azure to 34%-35%, which the analysts believe represents "true acceleration" compared to the first half and sets Microsoft up strongly for its 2026 fiscal year. In a note to clients, the RBC team, led by Rishi Jaluria, highlighted that many investors remain hesitant. Their discussions revealed that some are "on the sidelines or underweight" on Microsoft shares until the company reports its fiscal second-quarter earnings. The analysts also pointed out that Microsoft's upcoming annual developers conference is unlikely to act as a significant catalyst for the stock. As Nvidia (NASDAQ:NVDA) gears up for its next earnings report, analysts at Wedbush and Raymond (NS:RYMD) James are maintaining their bullish outlook on the stock, even as elevated market expectations raise the possibility of short-term volatility. Wedbush highlighted Nvidia's consistent track record of outperforming forecasts, driven by strong AI spending from both hyperscale and non-hyperscale customers. The firm expects this trend to continue into the next fiscal year, with Nvidia likely surpassing estimates by around $2 billion, as seen in recent quarters. "We see no reason to shift our constructive opinion on NVDA in light of our outlook for a robust 2025," Wedbush stated in a note to clients, raising its price target from $138 to $160. Raymond James is equally optimistic but acknowledged potential supply-side challenges that could limit near-term upside. The firm noted that Nvidia's balance sheet inventory, measured in days of inventory (DoI), is at a four-year low, signaling constraints tied to the complexity of Nvidia's new systems and longer production cycle times. These factors may temporarily restrict the volume of shipments for Nvidia's Blackwell GPUs. Despite these short-term hurdles, Raymond James expects a ramp-up in Blackwell shipments in the first half of 2025, supported by robust demand for Nvidia's Spectrum-X networking technology. The firm raised its price target from $140 to $170, reiterating that "any pullback due to high expectations [is] an opportunity." Both firms see Nvidia's leadership in AI and advanced computing technologies as key drivers of its long-term growth, with any near-term weakness in the stock viewed as a potential entry point for investors. Following Donald Trump's victory in the US presidential election, Tesla Inc (NASDAQ:TSLA) has been recast as "a must-own stock" in the eyes of investors, JPMorgan (NYSE:JPM) said in a recent note. This marks a dramatic reversal from the past two years, during which the company struggled with weak demand for EVs, gross margin challenges, and missed earnings expectations. Tesla stock rose sharply on Monday, continuing its upward trajectory from last week, a movement largely attributed to Trump's surprise win over Kamala Harris. But JPMorgan highlights that the stock's momentum was already building before the election, noting it was on a "glide path" toward $300, driven by what the firm calls "a thesis-changing earnings print/forward guide." The electric vehicle maker's latest earnings report offered promising signs for investors, showing that gross margins are expected to hit their lowest point in the fourth quarter before improving. This outlook sets the stage for "a potential cycle of positive estimate revisions" after a stretch of negative trends, JPMorgan said in a note. Tesla also stands out in the automotive sector for its anticipated production growth. Based on its 2025 deliveries growth guide, it is the only major automaker expected to significantly increase production next year. This optimistic forecast has spurred a shift in investor sentiment. Hedge funds and long-only investors, who previously held negative views on Tesla, are adopting a more neutral or even bullish stance on its prospects. This shift is particularly notable given Tesla's history as a frequent target of short sellers and its limited representation in long-only portfolios. JPMorgan adds that this evolving investor perception is likely to create "technical upward pressure" on the stock, as long-only investors move from neutral to overweight positions and hedge funds reduce their short positions. Morgan Stanley (NYSE:MS) analysts have raised their price target for Dell Technologies Inc (NYSE:DELL) from $135 to $154, citing strong growth prospects in the company's AI server business.The firm pointed out Dell's strengthening position in AI infrastructure, driven by projections of 48,000 eight-GPU AI server shipments in fiscal 2026 (calendar year 2025). This marks a 23% year-over-year increase and reflects the company's expanding role in the AI market. These shipments are expected to generate approximately $20.6 billion in AI server revenue, representing a 56% upward revision from earlier forecasts. AI servers are projected to account for nearly 20% of Dell's revenue in fiscal 2026, analysts note, underscoring their significance as a key driver of growth. "While our 3Q24 CIO Survey showed that DELL is the best-positioned hardware vendor to capture traditional enterprise spend over the next 3 years, our recent AI server checks show that DELL's AI infrastructure momentum is building even faster," analysts led by Erik W. Woodring wrote in a note to clients. They also addressed potential challenges related to margins. The analysts acknowledged that the shift toward AI server revenue could slightly pressure gross margins. However, they expressed confidence that Dell's ability to sustain operating profitability would offset any negative impacts, positioning the company for robust long-term performance. With accelerating demand for AI infrastructure and Dell's expanding market share, the analysts view the company as well-positioned to capitalize on one of the fastest-growing sectors in technology. Earlier this week, Citi analysts said that the recent decline in semiconductor stocks may be nearing its conclusion, signaling that "it is almost time to buy again" as the sector's outlook for 2025 gains traction. "We believe the downside/sell-off is almost over and attention will shift to 2025," the bank stated in its latest note. Citi's earnings recap highlights that consensus earnings per share (EPS) estimates for semiconductor firms dropped by 11% during third-quarter results, largely due to weakness from Microchip (NASDAQ:MCHP), NXP Semiconductors (NASDAQ:NXPI), and Intel (NASDAQ:INTC). In addition, the SOX index, which tracks semiconductor performance, fell 9%. According to Citi, this drop reflects the bulk of the anticipated downside, suggesting the worst may now be over. Looking ahead, Citi projects global semiconductor sales will grow by 9% year-over-year in 2025, building on this year's robust 17% expansion. Key growth drivers include stabilization in industrial markets and the expected end of a correction in the automotive segment by the first half of 2025. "The other 75% of semi demand appears to be solid," the analysts stated, recommending investors begin building positions in semiconductor stocks and adopt a more aggressive stance heading into the first quarter of 2025. Citi's buy-rated stocks include Advanced Micro Devices (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), Nvidia, Texas Instruments (NASDAQ:TXN), and Micron Technology (NASDAQ:MU). The Wall Street bank also emphasized that AI remains a continuing growth catalyst for the sector. It pointed out that combined 2024 AI spending from major tech companies like Alphabet (NASDAQ:GOOGL), Microsoft, Meta (NASDAQ:META), and Amazon (NASDAQ:AMZN) has risen by approximately $11 billion. This benefits semiconductor companies with significant AI exposure, such as AMD, Nvidia, Micron, Marvell (NASDAQ:MRVL), and Broadcom.

Evercore ISI gives its top tech picks for 2025

Evercore ISI already named its favorite technology stocks to own heading into 2025. As a group, information technology is up nearly 32% year to date, one of the top-performing sectors in the S & P 500. Large cap tech stocks in particular have been at the forefront of the equity rally since late 2022, when the artificial intelligence chatbot ChatGPT debuted. More recently, however, the IT sector has come under pressure amid questions as to whether tech companies will continue to see the growth needed to justify their lofty valuations. Against that background, Evercore ISI analysts recently picked five tech stocks they're most sure of entering next year. Here are the investment bank's stock picks, and where the recommendations are forecast to head next. Arista Networks The cloud network equipment company's conservative revenue guidance for 2025 leaves room for upside potential, according to Evercore ISI. "We think ANET is uniquely positioned to deliver revenue acceleration in CY25 and beyond driven by multiple levers," a group of analysts wrote in a Wednesday note. According to their forecasts, Arista Networks' revenue will grow by more than 20% in 2025 and 2026. They cited tailwinds such as customer expansion, growth across its front-end network and Cognitive campus workspaces service . The company's back-end AI offerings are another potential driver of revenue growth, according to the analysts. "We continue to see Arista as the leader in AI ethernet switching and customer adoption should accelerate in CY25," the note continued. Evercore ISI raised its 12-month price target on Arista to $450 from $425, indicating more than 20% upside from Friday's close. The stock has surged 59% year to date. Apple Artificial intelligence will power Apple 's long-term growth story, according to Evercore ISI. Although sales for its new iPhone released in September haven't sparked an upgrade supercycle, the investment bank believes iPhone growth will eventually improve as more AI features are added. "While this may be disappointing for those hoping for a very strong iPhone 16 cycle, we think it is important to note that Apple's AI strategy goes beyond simply selling more iPhones," the analysts said. "Apple will continue to function as a gatekeeper to it's 1.5B+ [user] install base and has the optionality to monetize 3rd party AI efforts. This will enable them to reap the AI rewards without the massive uptick in capex we are seeing at their mega cap peers." In addition to benefits from more AI features, Apple's services and wearables segments are also expected to grow next year. Evercore ISI has an unchanged $250 price target, which implies shares gaining 11.1% from where the stock closed Friday. Apple shares are up 17% in 2024, lagging the 23% gain in the S & P 500. Amphenol The fiber optic connector manufacturer offers both double-digit revenue growth and low volatility, according to Evercore ISI's analysts. Amphenol also produces electronic connectors and cables which it sells across a diverse range of markets, including to defense, tech and broadband companies. Amphenol is also expected to benefit as some of its customers, such as industrial and mobile networks groups, recover. The Wallingford, Connecticut-based company also has a strong track record in acquisitions and a solid balance sheet ensuring it can continue deal-making -- which Evercore ISI estimates could add from 15 cents to 20 cents to its earnings per share on an annual basis. The stock closed at $70.52 on Friday. "We think APH is well-positioned to benefit from AI ramps by providing highly complex/efficient connectors for AI servers and networking," the Evercore analysts wrote. "Additionally, APH's deep exposure over a range of technology and strong partnerships allow[s] them to be flexible in reacting and capturing short and long-term AI opportunities," the note said. Evercore ISI increased its price target on the $90-billion stock by $5 to $80 per share, or more than 13% above Friday's close. International Business Machines IBM is likely to top revenue estimates in 2025, Evercore ISI said. Growth in IBM's software segment, which reached double digits in the third quarter, will likely continue thanks to high demand for AI and data solutions. IBM currently has $3 billion worth of AI business booked, which could also boost demand for its software offerings, Evercore ISI said. IBM may also gain from President-elect Donald Trump's second term push to lift regulations. "A more favorable regulatory backdrop for M & A could accelerate deal activity," Evercore ISI wrote. "IBM notably could be positioned for larger transactions given their balance sheet" and free cash flow generation. Vertiv Holdings Vertiv Holdings is a long-term beneficiary of the AI boom, Evercore ISI said. The Waterville, Ohio company's 27,000 employees provide digital infrastructure technologies to data centers. Shares have more than doubled in 2024, soaring 152% in 2024 amid the boom in data centers that's driven demand for Vertiv's liquid cooling technologies. "We think the company is well-positioned to not just capture secular tailwind AI infrastructure tailwinds, but also gain share in an expanding market, and more importantly, do so in an increasingly more profitable manner," the Evercore note said. The analysts believe Vertiv's profit margins before interest and taxes could reach the mid 20% level as it optimizes scale and business processes. The bank lifted its price target to $150 from $135, implying Vertiv shares might rally 24% over the next year compared to where they closed on Friday. -- CNBC's Michael Bloom contributed to this report.