5 big analyst AI moves: AI stocks not in bubble; SMCI downgraded

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

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BofA on Nvidia stock: ‘Compelling growth at compelling valuation’

Bank of America this week reiterated its Buy rating on NVIDIA Corporation (NASDAQ:NVDA) stock, highlighting its “compelling growth at a compelling valuation.”

Despite some short-term headwinds, BofA analysts view these challenges as an attractive buying opportunity.

Nvidia is currently facing delays in its Blackwell product line, potential regulatory scrutiny from a DOJ antitrust investigation, and broader market issues like weak seasonality and interest-rate concerns. However, BofA believes these factors could boost the stock’s buy potential, particularly given its valuation.

The stock trades at about 27x its expected CY25 price-to-earnings (P/E) ratio, placing it in the lowest quartile of its five-year range, which BofA sees as a favorable entry point.

Even with the Blackwell delays, BofA emphasizes Nvidia’s consistent growth, driven by demand for its previous generation Hopper chips. The bank also points out that Nvidia’s AI products “have consistently trounced industry benchmarks,” signaling that the company’s dominance in AI is unlikely to fade.

BofA is particularly optimistic about Nvidia’s role in the next generation of large language models (LLMs), including OpenAI’s GPT-5 and Meta’s Llama 4, which are expected to bring significant advancements in AI capabilities.

“AI capex is not just driving new business opportunities, it’s also critical in protecting existing moats and large profit pools in search, social and enterprise (chat, copilot) workloads,” BofA’s team adds.

The firm views Nvidia as a top pick in the tech sector, with supply chain updates in the coming weeks likely to serve as a key recovery catalyst for the stock.

Microsoft, Adobe added to WF’s ‘Signature Pick’ portfolio

Wells Fargo has added Microsoft Corporation (NASDAQ:MSFT) and Adobe Systems Incorporated (NASDAQ:ADBE) stocks to their “Signature Picks” portfolio.

The analysts revealed in a Wednesday note they had opened a 4% position in Microsoft, citing the company’s “cloud positioning and [artificial intelligence] leadership.”

They highlighted that AI has been a key factor in driving second-half strength in Microsoft’s Azure cloud division.

The analysts also initiated a 2% position in Adobe, noting that “design is one of the most tangible use cases” of generative AI.

They added that concerns about competition in the space are “overblown” and emphasized that “Adobe’s moat remains robust.”

AI stocks not in a bubble but concentration risks elevated

In a Thursday note, Goldman Sachs strategists dismissed concerns that the AI sector is in a bubble, though they caution that concentration risks remain high due to the dominance of a few large-cap companies.

Since 2010, the technology sector has accounted for 32% of global equity performance, driven by solid fundamentals and the introduction of transformative technologies like AI. Despite the rapid rise in valuations, Goldman believes AI is “likely to continue to dominate returns,” rather than signaling a bubble.

The report points to the “Magnificent Seven” – major U.S. tech companies such as Apple (NASDAQ:AAPL), Microsoft, and Nvidia – which now hold a significant share of the market.

These companies, supported by robust earnings and substantial AI investments, are not displaying signs of the irrational exuberance seen in past bubbles, such as the late-1990s dot-com boom. Their profitability and cash flows justify their valuations, which remain far below the levels of the tech bubble.

However, Goldman warns that market concentration is at historic levels. The top 10 companies now account for more than one-third of the S&P 500, while the five largest companies represent 27% of the index’s total value.

The strategists pose the question of whether this AI-driven surge in tech stocks could be nearing bubble territory, or if the concentration of power in a few companies is creating a “dangerous trap” for investors.

On the other hand, this concentration could offer an “opportunity to diversify into potential beneficiaries of these technologies through cheaper companies outside of the dominant few,” the note adds.

Mizuho adds Micron, Oracle stocks to Top Picks List

Mizuho analysts added Micron Technology Inc (NASDAQ:MU) and Oracle Corporation (NYSE:ORCL) to their Top Picks List, the investment bank’s selection of high-conviction, catalyst-driven ideas.

For Micron, a key player in the AI boom, the analysts expect the company to benefit from better pricing in DRAM and NAND, with AI-related tailwinds boosting its HBM market share. Micron’s partnership with NVIDIA, in particular, is expected to support these gains.

Mizuho projects that HBM3E will capture around 70% of the HBM market by 2025, with Micron continuing to be a significant supplier for NVIDIA’s AI GPU ramp. This could drive HBM share growth through the second half of 2024 and into 2025. The analysts also anticipate that AI devices will require double the DRAM and NAND content compared to traditional devices by 2025.

Though a yield issue with Micron’s HBM has impacted margin expansion in the November quarter, Mizuho analysts believe margins could improve by 2025 as HBM accounts for a larger share of revenue and utilization rates for DRAM and NAND rise.

“We believe corrections in most consumer end markets is nearly complete, but demand headwinds remain as refresh cycles for handsets and PCs look extended vs. prior years,” they noted.

Regarding Oracle, Mizuho believes that the company’s cloud infrastructure (OCI) is undervalued.

Its competitive pricing, around 33% lower than AWS, positions Oracle to capture more enterprise customers as they transition from on-prem to cloud solutions. The analysts expect Oracle’s strong on-prem customer base to serve as a significant revenue driver.

In addition, they are confident that Oracle can expand its operating margins to 45% by FY26 through “cloud margin expansion, sales and R&D efficiencies, and leverage from scale.”

SMCI stock downgraded at JPMorgan on regulatory uncertainty, competitive pressures

JPMorgan analysts downgraded Super Micro Computer (NASDAQ:SMCI) from Overweight to Neutral on Friday, with the company’s shares falling over 3% following the market opening.

The analysts emphasized that while they remain confident in Super Micro’s ability to regain compliance with regulators, the near-term uncertainty is a key factor in the rating change.

They explained that “a near-term view where there is a not a clear rationale for new investors stepping into SMCI shares while uncertainty exists around regaining compliance with regulators that is critical beyond the unchanged business fundamentals.”

JPMorgan also raised concerns about the company’s potential response to competitive pressures in the AI server market. Analysts noted that aggressive pricing to retain customers could impact margins, potentially prompting a competitive response from peers.

The firm believes that, while meeting regulatory requirements could serve as a positive catalyst, investors are likely to wait for clearer signs that customer demand and margin outlooks remain stable before fully committing.

In light of these uncertainties, JPMorgan advises new investors to hold off on taking positions until the company regains compliance with regulators.

The firm also cut its December 2025 price target from $950 to $500, reflecting a lower earnings multiple more in line with traditional IT hardware companies, which typically experience slower growth.