Month: June 2024

Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.

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‘AI-enabled upgrade is coming:’ Apple reiterated as Top Pick at BofA

Bank of America reiterated Apple (NASDAQ:AAPL) stock as their Top Pick, maintaining a price target of $230.

In particular, Wall Street giant analysts are bullish about Apple’s transition from smartphones to “IntelliPhones,” predicting a significant multi-year upgrade cycle.

“We view the upcoming AI-enabled phones (IntelliPhones) to drive a multi-year upgrade cycle similar to the step function improvement driven by the introduction of smartphones,” the note stated.

BofA’s team believes that with a vast installed base of over four billion smartphones, the adoption of AI-enabled IntelliPhones will surpass the rapid uptake seen with smartphones and 5G.

IntelliPhones are expected to leverage advanced AI and machine learning for features such as superior personal assistance, language processing, health monitoring, enhanced photography, and AR/VR experiences, among other things.

Needham downgrades UiPath stock

Needham analysts on Thursday downgraded UiPath (NYSE:PATH) stock from Buy to Hold citing a mix of factors, including macroeconomic headwinds and a changing go-to-market (GTM) strategy.

“We downgrade PATH shares to Hold due to a combination of macro pressure, uncertainty around near-term execution due to a CEO change and a changing GTM strategy, and Y/Y margin compression creating an unfavorable near-term financial profile,” analysts wrote.

The investment firm noted that the company’s Q1F25 sales metrics were mildly disappointing, with large deals facing incremental scrutiny.

The recent CEO change back to founder Daniel Dines, following Rob Enslin’s departure, and multiple GTM changes are expected to cause near-term sales disruptions.

Net new annual recurring revenue (ARR) and revenue guidance were both lowered, which Needham believes is “conservative enough, but we think it will take multiple quarters for the GTM changes to start driving meaningful upside to guidance.”

Northland ups C3.ai to Buy amid accelerating subscription growth

Enterprise AI firm C3.ai (NYSE:AI) saw its shares upgraded by Northland analysts during the week from Market Perform to Outperform, with a target price of $35.

Analysts highlighted the company’s rising subscription growth in Q4 2024 as a key factor behind the upward revision.

“C3.ai posted accelerating subscription growth to 41% in 4Q24, providing evidence that the headwinds from a migration to a usage-based revenue model are abating,” analysts commented.

Looking forward, strong pilot expansion and demand for generative AI (genAI) signal continued high growth, they added.

Mizuho hikes price targets on chip stocks as AI moves to the edge

Japanese investment banking and securities firm Mizuho lifted its price targets on several chipmakers this week, including Micron Technology (NASDAQ:MU), Qualcomm (NASDAQ:QCOM), Seagate Technology PLC (NASDAQ:STX), and Western Digital (NASDAQ:WDC).

The move comes as Mizuho analysts believe the next catalyst for AI will be at the edge, as original equipment manufacturers (OEMs) push AI on-device capabilities for handsets and PCs.

The firm reiterated Buy ratings, raising price targets to $240 for Micron, $155 for Qualcomm, $90 for Seagate, and $110 for Western Digital.

Analysts highlighted Qualcomm’s ramp-up with AI PCs using Snapdragon X Elite and Plus, and the expected increase in AI smartphone shipments.

Moreover, AI PCs, requiring 40% to 80% more DRAM, and handsets needing 50% to 100% more DRAM, present tailwinds for Micron. Western Digital and Micron are also expected to benefit from higher NAND content in AI devices with improved pricing.

Meanwhile, Seagate stands out with higher storage content on PCs and increasing cloud capital expenditure. Mizuho forecasts 1 billion AI smartphones shipped from 2024 to 2027, with AI PCs comprising up to 60% of the PC market by 2027.

Dell is a ‘legit GenAI participant,’ says Loop Capital

In a new note to clients, analysts at Loop Capital reiterated a Buy rating on Dell Technologies (NYSE:DELL) shares and lifted their price target from $125 to $185, emphasizing the IT company is “progressing as a legit GenAI participant.”

“Dell continues to show legitimate GenAI progression the last 90 days which seemingly could progress through CY2025,” Loop analysts stated.

The investment bank pointed out Dell’s well-positioned stance for long-term commercial IT budget share, noting the company’s expanding capabilities across infrastructure products, services, and financing.

Dell identified a $2 to $3 attach revenue opportunity in services, networking, and storage for every $1 of GenAI server revenue.

“On storage specifically, there has been a suggestion in our work that for commercial (non-Hyperscale) Gen AI storage that after VAST Data & WEKA, DELL storage could be as well positioned as PSTG & NTAP, if not better positioned,” analysts wrote.

Analysts also highlighted that Dell has pre-purchased over $7 billion in NVIDIA (NASDAQ:NVDA) GPUs, significantly boosting inventory in the last 90 days. Dell expects to secure $10 to $15 billion worth of GPUs over the next six quarters, aligning with its potential Generative AI revenue of $9 to $10 billion in 2024 and possibly $15 billion in 2025.

Current guidance for Generative AI server revenue in 2024 is about $5 billion. Despite a slight decline in PC shipments and a 200 basis point drop in market share, Dell’s core commercial market exposure is expected to grow in late 2024 and 2025.

Investing.com — Friday’s all important non-farm payrolls report will be the highlight of the economic calendar in the coming week as markets try to gauge the future direction of U.S. interest rates. The European Central Bank is likely to deliver a rate cut that will put the Eurozone on a diverging rate path from the U.S. Meanwhile, OPEC is to decide on output cuts and the Bank of Canada will deliver its latest rate decision. Here’s your look at what’s happening in markets for the week ahead.

Jobs numbers

Fridays closely watched nonfarm payrolls report is expected to show that the U.S. labour market remained strong again in May. Economists are expecting the economy to have added 185,000 jobs, a modest uptick from the prior month.

Investors had been worried that an overly strong economy might prevent the U.S. Federal Reserve from lowering rates this year at all, or even require a rate rise. But those concerns were alleviated last month, albeit temporarily, by data showing slowing inflation and a cooling labour market.

Still, policymakers have urged patience on rate cuts, saying they would like to see several months of data to be sure inflation is heading back towards their 2% target. The employment report could prove the economy is losing steam if it shows the slowdown in job creation has continued.

ECB rate decision

The ECB is all but certain to become the first major central bank to cut interest rates this cycle on Thursday.

With a 25 basis point rate cut all but promised by policymakers market watchers will be focusing on what ECB President Christine Lagarde has to say about what comes next.

Inflation in the bloc’s dominant services sector remains sticky and its economy is recovering faster than expected, while a closely watched wage growth figure accelerated last quarter, leaving the outlook beyond June less certain.

Markets are still expecting the ECB will cut rates multiple times this year compared the Fed and the Bank of England though bets on future moves have been trimmed back.

They now expect two cuts and less than a 50% chance of a third – compared with three when the ECB last met and at least five at the start of the year.

OPEC output cuts

OPEC+ will likely agree on Sunday to prolong its deep oil output cuts into 2024 and possibly 2025 Reuters reported, as the group seeks to shore up the market amid tepid global demand growth, high interest rates and rising rival U.S. production.

Oil prices are trading near $80 per barrel, below what many OPEC+ members need to balance their budget. Worries over slow demand growth in top oil importer China have weighed on prices and oil market analysts expect OPEC+ to extend cuts to balance supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, has made a series of deep output cuts since late 2022.

OPEC+ members are currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7% of global demand.

Wall Street

Despite all three major U.S. stock indexes posting losses last week they still ended the month higher, with the S&P 500 rising about 4.8%, the Nasdaq jumping 6.9% and the Dow climbing 2.4%.

While it’s been a banner year for the major U.S. stock indexes, one economically sensitive corner of the market remains a sore spot.

The Dow Jones Transportation Average has fallen about 5% so far this year and some investors have said the struggles for the 20-stock transport index – which includes railroad operators, airlines, package shipping companies and trucking firms – could signal weakness in the economy or prevent the broader market from making significant further gains unless they bounce back.

The Dow transports are “a barometer for future economic activity,” Chuck Carlson, chief executive officer at Horizon Investment Services told Reuters. “They may be indicating that while a recession isn’t imminent, that there is probably a slowdown in the economy that’s ahead here.”

Bank of Canada

The BoC is widely expected to deliver a 25-basis point rate cut at its upcoming meeting on Wednesday after data on Friday showed the country’s economy expanded at a slower than expected pace in the first quarter.

The GDP report indicated that Canada’s economy did not rebound from a soft patch last year as strongly as data initially suggested and may convince the central bank to start lowering borrowing costs.

“All ducks appear to be in a row for the Bank of Canada to kick-start the policy easing cycle and lower the overnight rate by 25 basis points to 4.75% on Wednesday,” RBC said in Friday note.

At the central bank’s last meeting in April Governor Tiff Macklem noted that the requirements for a rate cut appeared to be in place but that officials needed to see more evidence on slowing inflation.

–Reuters contributed to this report