5 big analyst AI moves: SMCI rating suspended, ARM stock downgraded
Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Wedbush ‘more bullish’ on Microsoft despite negative post-earnings reaction
Wedbush analysts said this week they feel “more bullish” about Microsoft (NASDAQ:MSFT) stock, despite the mixed reactions following the tech giant’s latest earnings report.
Microsoft posted first-quarter results that exceeded expectations, driven by robust growth in Azure. The cloud service reported a 34% year-over-year growth in constant currency, surpassing forecasts by 100 basis points.
AI growth played a key role, contributing a 12% boost compared to 8% in the previous quarter. This performance underlined strong AI monetization trends that continue to support Microsoft’s core cloud business.
Despite these results, Microsoft shares fell Thursday, impacted by guidance for Azure’s December quarter growth in constant currency, projected at 31%-32%, which fell short of the most bullish investor expectations.
Wedbush analysts, led by Dan Ives, pushed back against the negative interpretation, stating they “disagree with this initial take.”
“The new Azure reporting standards have moved Street numbers all around and a slight deceleration is totally expected by many investors with some supply constraints and reacceleration in 2H25 and we would be strong buyers of MSFT on any weakness this morning,” Ives noted.
The analysts emphasized that December’s headline figures were solid, particularly in the core Intelligent Cloud segment. Any observed weakness was attributed to softer PC demand, which they described as “background noise” in the context of Microsoft’s broader cloud and AI growth.
“We come away from this quarter more bullish (not less) after seeing this AI growth and Copilot monetization play out in real time for Microsoft. The bears will try to split hairs on any number but ultimately this is a tech stalwart in major growth mode,” analysts continued.
Barclays: Google stock upside ‘somewhat capped’
Barclays analysts noted that shares of Google owner Alphabet (NASDAQ:GOOG) could face volatility in the near term, despite the company’s strong third-quarter earnings report.
Alphabet reported revenue and earnings per share (EPS) that surpassed consensus estimates by 2% and 15%, respectively. Revenue from Search and YouTube matched expectations, while the Cloud segment delivered a notable outperformance.
Barclays pointed out that the transition to the new CFO went smoothly, though investors remain keen for more detailed insights into the company’s operations.
Given Alphabet’s ongoing legal issues, the company’s continued “high-level communication philosophy” was not unexpected, according to the analysts.
The regulatory environment is likely to draw renewed attention in the coming weeks, as Google (NASDAQ:GOOGL) plans to present a proposed remedy package ahead of the Department of Justice’s (DoJ) specific requests. This could impact the stock’s performance.
Because of this, analysts indicated that “the upside for GOOGL shares near-term is somewhat capped.”
“The 20x EPS multiple reflects some of the regulatory and AI-related risks, which we continue to muddle through ever so slowly,” they added.
Bernstein cuts Arm stock rating, says valuation is ‘too steep’
Bernstein analysts downgraded their rating for Arm Holdings (NASDAQ:ARM) to Underperform from Market Perform, pointing to near-term “cyclical headwinds” that could impact the chip designer.
While acknowledging that the long-term equity story for Arm remains “very appealing,” the analysts voiced concerns about the company’s revenue prospects outside of the artificial intelligence space.
They cited challenges affecting industries such as automaking and technology, which heavily depend on processors built using Arm’s designs.
“Putting all of this together, we do not believe that Arm is immune to these cyclical headwinds when it comes to royalties, specifically — although the long term story remains very attractive in our view,” the analysts wrote.
Ahead of the company’s quarterly results set for November 6, Bernstein subsequently lowered its expectations for Arm’s royalties and licensing income. The UK-based company derives royalties from each chip sold using its technology, along with licensing fees for its semiconductor designs.
The analysts also revised down their fiscal year 2025 revenue target for Arm. They noted that the company’s current stock valuation, at 45 times 2026 fully-diluted earnings per share, is “too steep.”
Rosenblatt suspends SMCI stock rating, price target
Rosenblatt Securities has suspended its rating, price target, and estimates for Super Micro Computer Inc (NASDAQ:SMCI) stock following recent developments.
More concretely, the AI server manufacturer recently revealed in an 8-K filing that Ernst & Young (EY) resigned as its registered public accounting firm last week.
According to the filing, the move was triggered by issues related to governance, transparency, and the completeness of communications from Super Micro to EY, alongside concerns about internal controls over financial reporting.
In its resignation letter, EY stated that it was “unwilling to be associated with the financial statements prepared by management.” The firm also highlighted concerns regarding the board’s independence from CEO Charles Liang and “other members of management.”
Super Micro has since begun the search for a new accounting firm and noted that it does not expect to restate its financials for fiscal year 2024 or prior periods.
Rosenblatt analyst Hans Mosesmann commented, “Due to the changes undergoing at EY, we believe EY may also be removing itself from riskier profile projects.”
He added, “Given the uncertainty surrounding the company’s financials, we are suspending our rating, price target, and estimates on Super Micro until we have an outcome that can determine our recommendation.”
Qorvo stock yet to price in AI premium, Needham says
According to Needham & Company analysts, Qorvo (NASDAQ:QRVO) is the one stock that has yet to fully realize the potential benefits from the AI-driven market shift.
The firm recently issued a Buy rating on Qorvo and set a price target of $135, seeing the semiconductor company as undervalued. Needham suggests that Qorvo’s current valuation does not yet capture the anticipated “AI-driven super cycle in CY25,” which could transform the smartphone market.
The analysts pointed out that Qorvo’s valuation compared to the semiconductor index (SOXX) is at multi-year lows, presenting a “compelling risk/reward” opportunity as sentiment in the mobile market shows potential for improvement.
“Management has been confident for several quarters regarding content gains in FY25 and FY26,” Needham noted, particularly with its major customer Apple (NASDAQ:AAPL). Additional opportunities could emerge if the AI-enabled smartphone product cycle gathers momentum.
Despite positive signs in the smartphone market, Needham believes that an AI premium has yet to be factored into Qorvo’s valuation, given the conservative estimates for CY25.
While global smartphone unit growth is expected, “our CY25 unit estimates are flattish, giving upside to any type of AI-driven super cycle,” the note stated. This indicates potential for upward revisions in both Apple and Android product lines as AI adoption accelerates.