BofA warns Fed risks policy mistake with early rate cuts
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!
Microsoft price target raised on cloud and AI strength
Truist Securities this week raised its price target on Microsoft (NASDAQ:MSFT) to $675 from $650, citing sustained strength in cloud and artificial intelligence (AI) growth.
The move comes as the broker remains “confident Microsoft can sustain strong momentum associated with cloud and AI secular growth drivers, while benefiting from a growth-enhancing halo effect across a multitude of MSFT’s individual infrastructure, data and app businesses.”
Truist analysts lifted their fiscal 2026 and 2027 forecasts for revenue, operating profit, and cash flow (CF), noting “opportunities for solid upside to ours and street estimates.”
They project that “sustained strong cloud growth at scale & growing AI demand capture can lead to at least low teens double-digit rev, profit & CF growth over an extended period, while consistently returning cash via divs/repurchases.”
Analysts highlighted Azure as a key driver, benefiting from existing workloads migrating to the cloud, scaling digital-native businesses, and the rapid expansion of AI use cases.
They also pointed to “revenue synergies and force multiplier effects” across Microsoft’s broader portfolio, including Fabric, Cosmos DB, PostgreSQL, AI Foundry, Microsoft 365 Copilot, GitHub Copilot, Defender, and Purview.
Truist believes that Microsoft’s “premium valuation is justified owing to the company’s picks and shovels status in the rapidly evolving AI landscape while sustaining strong commercial bookings, RPO, cloud and Azure growth rates.”
Nvidia may guide below consensus, analysts warn
Nvidia (NASDAQ:NVDA) may post strong July-quarter results but could guide below Wall Street expectations for the October quarter due to uncertainty around China, according to KeyBanc Capital Markets.
The brokerage expects the outlook to “exclude direct revenue from China given pending license approvals and uncertainty on timing.” It added that if China sales were included, “we believe it would contribute an incremental $2-3B in revenues, given H20 and the RTX6000D (B40).”
Despite the U.S. easing some AI chip restrictions, analysts see Nvidia taking a cautious stance. “Consistent with AMD’s recently reported results, we expect NVDA’s F3Q guidance to exclude direct contributions from the China market,” KeyBanc wrote.
The firm also pointed to “a potential 15% tax on AI exports and pressure from the China government for its AI providers to use domestic AI chips” as risks.
Still, the underlying growth story remains strong. “GPU supply grew 40% in F2Q and [is] projected to increase another 20% in F3Q” with the ramp of the Blackwell (B200), the analysts said.
The upcoming Blackwell Ultra (B300) is scheduled to ship in the October quarter and could make up half of Blackwell volumes.
Rack manufacturing trends also look encouraging.
“Given improving GB200 rack manufacturing yields at server ODMs, which we believe are approaching 85%, we believe rack shipments are on track to exit C4Q at 15K-17K racks and believe full-year GB rack shipments are tracking closer to 30K, vs. our prior est of 25K,” KeyBanc’s team wrote.
The broker reiterated an Overweight rating and raised its price target to $215 from $190 ahead of Nvidia’s Aug. 27 results.
BofA upgrades Snowflake on solid demand, long-term AI opportunity
Bank of America Securities upgraded Snowflake (NYSE:SNOW) to Buy from Neutral and lifted its price target to $240 from $220, citing stronger demand trends and long-term opportunities in AI and data services.
The new target suggests nearly 22% upside from the stock’s last close.
BofA analysts pointed to multiple proprietary data sources indicating positive momentum in Snowflake’s core data warehouse business as well as in its newer Cortex AI and Snowpark developer platforms.
“We upgrade Snowflake to Buy from Neutral, and raise our estimates, and PO to $240…given three distinct proprietary data sources which point to momentum in Snowflake’s data warehouse and emerging Cortex AI and Snowpark developer businesses,” the team wrote.
For the second quarter, BofA projects product revenue of about $1.06 billion, roughly 2.5% above company guidance, supported by stronger web activity and encouraging channel checks.
Partners reported customers increasingly view Snowflake as central to the AI stack, with shorter sales cycles and rising budgets for AI-related projects.
Survey work reinforced this view, showing Snowflake customers expect to boost spending by 12% over the next year compared with 9.5% previously. More than half of respondents said they already use the platform for AI workloads, underscoring its expansion into a broader AI data platform.
While competition and the consumption-based model pose risks, analysts pointed to a $155 billion AI software market as a significant opportunity.
“While we believe that Q2 earnings will be a catalyst for the stock given multiple positive data points outlined below, our call is for outperformance over the long term given incremental traction with products addressing a significant larger addressable AI market for software of $155bn,” analyst Brad Sills said.
Palo Alto upgraded to Buy after strong quarterly results
Palo Alto Networks (NASDAQ:PANW) shares jumped earlier this week after the company posted better-than-expected results and lifted its long-term outlook.
The cybersecurity firm reported fourth-quarter earnings of $0.95 per share, topping estimates of $0.89. Revenue came in at $2.5 billion, in line with consensus.
For fiscal 2026, Palo Alto expects EPS between $3.75 and $3.85 versus the $3.69 forecast, and revenue between $10.475 billion and $10.525 billion compared with the $10.44 billion estimate.
Bank of America upgraded the stock to Buy from Neutral, citing strong execution and a favorable growth profile. The bank kept its $215 price target.
BofA said Palo Alto delivered “impressive performance on all fronts,” pointing to 32.2% growth in next-generation security annual recurring revenue, 24.4% growth in remaining performance obligations, and a 19.4% increase in product revenue.
Operating margin was 160 basis points ahead of expectations, while free cash flow margin reached 37%. Guidance was described as “generally above expectations.”
“At a high level, the company’s strategy appears to be working well, with 1400 platform deals, and software is driving up growth, accounting now for 56% of product revenues vs. 44% last year,” BofA noted.
The bank also highlighted a 120% net revenue retention rate in platform deals and 25% annual recurring revenue growth in Cortex and Prisma Cloud.
Strength was also seen in virtual firewalls and firewall-as-a-service, where Palo Alto holds nearly 50% share in segments expanding more than 20% annually.
Still, BofA said risks around valuation and margins remain.
“The risks to our rating are mainly around concerns we’ve highlighted in the past regarding peaking margins and valuation limitation,” analysts wrote, noting the stock trades at about 46 times 2026 earnings with an additional 15% stock-based compensation impact.
Software (ETR:SOWGn) stocks could see short-term gains: Barclays (LON:BARC)
Barclays expects U.S. software stocks to see short-term gains this earnings season, even as uncertainty around artificial intelligence continues to weigh on sentiment.
“Our checks show solid end demand and valuation levels are much lower, but is this enough to overcome the AI uncertainties? Maybe, not for the long run, but we expect a positive bounce in the short-term nonetheless,” analyst Raimo Lenschow wrote in a Monday note.
He added that while concerns about generative AI persist, “our checks are solid to slightly better than the on-cycle ones,” and with most software stocks underperforming outside a handful of AI winners, “we would expect a positive bounce as numbers are holding up and valuation levels are low.”
Lenschow pointed to Salesforce Inc (NYSE:CRM) and Elastic NV (NYSE:ESTC) as attractive opportunities in the current setup.
For Salesforce, survey results showed sustained customer demand for its AI products, and the analyst expects another small earnings beat. The October Dreamforce event, where the company is likely to unveil the next version of its Agentforce platform, is seen as the key near-term catalyst.
“To us, this suggests that news flow from here will likely be more positive than negative, which should drive shares,” Lenschow said. Barclays kept an Overweight rating while lowering the price target to $316 from $347.
On Elastic, Barclays cited “very conservative guidance” from its new CFO, which it believes sets the company up to deliver and potentially raise guidance.
The bank’s checks indicated “healthy conversions from proof-of-concepts around hybrid search to proper projects that use ESTC’s vector database capabilities,” supporting a favorable outlook for the quarter.