5 big analyst AI moves: Nvidia still top pick into 2025; MU, ORCL downgraded

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! Nvidia stock remains top pick for 2025: MS

Morgan Stanley (NYSE:MS ) reaffirmed Nvidia (NASDAQ:NVDA ) as a top stock pick for 2025, maintaining its Overweight rating and a price target of $166.

Despite some near-term headwinds, including a slowdown in Hopper builds and staggered Blackwell product readiness, Morgan Stanley views these challenges as temporary.

By the second half of 2025, the strength of Blackwell will be “the only topic,” the firm’s analysts stressed.

Addressing competitive pressures from ASIC solutions, particularly from Marvell (NASDAQ:MRVL ) and Broadcom (NASDAQ:AVGO ), Morgan Stanley believes purchasing trends will favor GPUs over time.

“While our forecasts for both AVGO/MRVL ASIC revenue are largely conservative, as are our forecasts for GPU, we believe that GPU will meaningfully outperform ASIC this year,” analysts noted.

The report also highlights Nvidia’s $12 billion annual R&D investments as critical for maintaining its leadership in AI hardware and system-level innovations.

Analysts also addressed the concerns over industry challenges, including scaling Artificial General Intelligence (AGI) clusters.

While technologists advocate for larger AGI systems, financial backers remain cautious about return on investment (ROI). Nvidia’s innovations, such as Mellanox (NASDAQ:MLNX ) and NV-Link, are positioned to improve efficiency in this area.

Nvidia’s growth drivers—including inference, sovereign AI training, and enterprise applications—account for 70% of its data center revenue. Analysts believe these segments will continue driving growth even amid potential industry consolidation by 2026. “Even with some consolidation in the arms race, we should still see enduring growth potential,” they commented.

The upcoming Consumer Electronics Show (CES) in January 2025 is expected to boost sentiment for Nvidia. Analysts anticipate the messaging will emphasize strong Blackwell demand, albeit with supply constraints.

“But by mid year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in 2h, potentially unlocking more significant upside,” the note concluded. Tesla stock remains the “narrative king”, Barclays says

Tesla (NASDAQ:TSLA ) has experienced an extraordinary rally since the U.S. election, solidifying its status as the market's "narrative king," according to analysts at Barclays (LON:BARC ).

The electric vehicle (EV) maker's shares have surged approximately 90%, adding about $730 billion to its market capitalization - a feat matched only by a few tech giants like Nvidia and Apple (NASDAQ:AAPL ).

Barclays notes that this performance is particularly remarkable given the stock's apparent disconnect from underlying fundamentals. Tesla's price-to-earnings (P/E) ratio has soared from 80x before the election to an elevated 145x based on 2025 consensus EPS estimates.

“The decoupling from fundamentals in many ways mirrors the rally we saw from Tesla in 2020-21," analysts led by Dan Levy said in a note.

They attribute this rally to the "magnification of Tesla's narrative command," which centers around themes like autonomous vehicles (AV) and AI.

Another factor contributing to the surge is the "Tesla-financial complex," where options activity amplifies stock movements. Moreover, retail investor interest remains robust, with 30% of Tesla's outstanding shares held by individual investors, according to Barclays.

“Tesla remains the 'OG meme stock,'” the analysts emphasized.

Barclays also pointed out the growth of the "Elon premium" in Tesla's valuation. The increased prominence of CEO Elon Musk has elevated interest in the company, translating to heightened enthusiasm for Tesla's stock. Micron downgraded at BofA after disappointing guidance

Bank of America (BofA) downgraded Micron Technology (NASDAQ:MU ) to Neutral from Buy, citing a weaker-than-anticipated gross margin (GM) outlook for the second and third fiscal quarters.

Shares of the chipmaker fell sharply Thursday after delivering disappointing Q2 guidance. Micron projects second-quarter revenue of approximately $7.9 billion, missing both BofA's $8.3 billion estimate and the consensus forecast of $9 billion. The company also expects a Q2 GM of 38.5%, below BofA's 40% estimate and the consensus of 41%.

“Data center and HBM trends remain strong but weakness in PC and phone markets are putting downward pressure on memory pricing, especially in NAND,” BofA analysts led by Vivek Arya noted. Persistent pricing challenges in NAND are expected to extend into the third quarter.

Although BofA remains optimistic about Micron's position in high-bandwidth memory (HBM) and AI markets, it lowered its fiscal 2025 and 2026 pro forma earnings per share estimates by 5% and 11%, respectively, to $6.80 and $8.78. The stock's price target was also cut to $110 from $125.

“Historically the stock has struggled to outperform when GM expansion has remained muted, leading to our stock downgrade to Neutral from Buy, even though we still feel positive about MU’s position in the HBM/AI market where TAM was taken up +20% for CY25 to $30bn.”

While data center and HBM trends are highlighted as strong, the weakness in PC and phone markets continues to weigh on memory pricing, particularly NAND. BofA does, however, see potential for recovery in these markets in the latter half of 2025. Oracle earns a downgrade on valuation, capex concerns

Monness, Crespi, and Hardt downgraded Oracle (NYSE:ORCL ) stock to Sell from Neutral, setting a 12-month price target of $130, implying over 22% upside from the current levels.

The firm raised concerns about Oracle's valuation, rising competition, and aggressive capital expenditure (capex) plans.

Oracle shares have climbed 60% year-to-date, largely driven by generative AI enthusiasm, marking their best performance since 1999. However, Monness analysts warned that "valuation is stretched, competition fierce, software in transition, and the macro environment fragile."

Oracle's recent Q2 earnings highlighted growth challenges, the firm noted. Its FY25 EPS estimate of $6.17 remains unchanged, while its FY25 Cloud Services revenue projection has been revised to $24.9 billion, down from last year’s $25.4 billion forecast.

Monness expressed particular concern over Oracle’s “bold capex plans,” with spending expected to double in FY25.

"Our current FY:25 capex projection of $14.2 billion represents 24.6% of revenue, up from 13% in FY:24, and well above the 27-year average of 4%," the analysts wrote.

They argue this level of expenditure is unsustainable, dragging Oracle’s free cash flow (FCF) margin to an estimated 8% for FY25, far below its historical average of 28%.

The firm also pointed to Oracle’s heavily leveraged balance sheet, with $88.6 billion in debt and a debt-to-capital ratio of 86%. This restricts the company’s ability to boost shareholder returns through dividends or buybacks and limits its capacity for acquisitions or broader organic growth investments.

While Oracle has seen early success in generative AI, Monness cautioned that "an inevitable shakeout in the LLM industry" and intensifying competition from major cloud providers could pose significant risks. ‘In AI we trust:’ BofA says, highlights 6 chip stocks for 2025

Bank of America outlined its 2025 semiconductor outlook on Monday, spotlighting six chip stocks it recommends for investors in the coming year.

The bank forecasts a 15% increase in semiconductor industry sales to $725 billion in 2025. This growth, although robust, is projected to be slower compared to the 20% growth seen in the current year.

BofA anticipates memory sales to rise by 20% in 2025, following a 79% year-over-year increase in 2024, with core semiconductors, excluding memory, expected to grow by 13%.

“We see 2025 as a year of two different trends. In the first half, AI investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis,” analysts led by Vivek Arya said in a note.

“However, in the 2H (second half), interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery.”

BofA’s top picks include leaders in AI such as Nvidia, Broadcom, and Marvell Technology.

“In AI we continue to trust.. at least till 2H25,” analysts said.

Furthermore, the firm identified Lam Research (NASDAQ:LRCX ) as a flash-memory tool leader poised for capital expenditure recovery and impact resolution in China.

Auto and EV leader ON Semiconductor (NASDAQ:ON ) is highlighted for its potential cyclical recovery in the second half of 2025, and Cadence Design (NASDAQ:CDNS ) Systems noted for its resilient double-digit growth, especially as the AI hardware cycle decelerates in the latter half of the year.

Source: Investing.com