As the artificial intelligence (AI) industry continues to captivate the tech world, Wall Street analysts are closely scrutinizing the sector’s key players and their prospects. This week witnessed a flurry of significant analyst moves, with experts weighing in on potential bubbles, stock valuations, and industry frontrunners.
Ahead of Nvidia’s (NASDAQ:NVDA) highly anticipated Global Technology Conference (GTC) next week, Wedbush analyst Bryson raised the firm’s target price on the chip giant from $850 to an impressive $1,000. Bryson cited robust demand for Nvidia’s AI products and anticipated positive catalysts from the upcoming event.
Notably, analysts expect insights into Nvidia’s new Blackwell architecture, which promises significant performance gains over the company’s current Hopper offerings. Bryson highlighted the potential for up to 9x faster training and 30x faster inference performance compared to the A100 chip.
Goldman Sachs: AI Boom Not a Bubble (Yet)
Amidst the relentless rally in AI stocks like Nvidia, speculation has arisen regarding a potential bubble forming in the market. However, Goldman Sachs analysts addressed these concerns in a recent note, asserting that while optimism around AI is surging, it hasn’t reached the peaks witnessed during the Tech Bubble or the immediate post-COVID-19 period.
The analysts highlighted that their revised long-term growth rate estimate for the sector stands at 11%, lower than the 16% seen during the Tech Bubble and 13% in late 2021. Additionally, the valuation of the largest 10 Technology, Media, and Telecom (TMT) stocks is currently at 28x, paling in comparison to the peak of the Tech Bubble (52x) and late 2021 (43x).
Investors’ favorite and least favorite AI stocks
Citi Research analysts, after meeting with investors, revealed the most and least favored stocks in the AI sector. Nvidia, AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), and companies in the equipment sector, including NXP Semiconductors (NASDAQ:NXPI), were among the top picks.
On the other hand, Micron Technology (NASDAQ:MU), ON Semiconductor (NASDAQ:ON), and Microchip Technology (NASDAQ:MCHP) were identified as the least favored stocks, with analysts noting concerns about a potential AI bubble and the sustainability of semiconductor stock valuations.
While acknowledging the possibility of a bubble, Citi analysts expressed conviction that the current AI boom could persist into 2025, drawing parallels to the tech bubble of 1999.
The semiconductor industry, a crucial component of the AI revolution, saw diverging opinions from analysts. Bank of America raised its price target on AI server maker Super Micro from $1,040 to $1,280, citing higher expectations for AI server industry growth.
BoFA analysts highlighted Super Micro’s competitive strengths, including its building block architecture, partnerships with leading AI chip manufacturers like Intel (NASDAQ:INTC), Nvidia, and AMD, and the ability to tailor configurations to customer needs.
Meanwhile, Citi Research initiated coverage on Pure Storage (NYSE:PSTG) with a Buy rating and a $65 target price, viewing the company as a “leading beneficiary of AI-induced transition to flash-based storage.” Despite concerns over Meta’s (NASDAQ:META) potential shift away from Pure Storage’s solutions, analysts remain optimistic about the company’s competitive pricing and recent AI-related project wins.
As the AI frenzy continues to captivate investors and analysts alike, the industry’s giants and emerging players are being closely scrutinized. While optimism abounds, experts caution against potential bubbles and urge careful consideration of valuations and long-term growth prospects. As the AI revolution unfolds, Wall Street remains committed to deciphering the market’s complexities and identifying the true winners in this transformative era.
