5 big analyst AI moves: Nvidia seen as ’least expensive’ AI play, Apple 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 upgraded to Buy, seen as the ‘least expensive direct investment’ in AI growth

Nvidia (NASDAQ:NVDA) was upgraded to Buy from Neutral at D.A. Davidson earlier this week, with the broker expecting sustained momentum from surging demand for AI compute. The price target was raised to $210 from $195 alongside the upgrade.

“Our increasingly optimistic view of the growth in AI compute demand supersedes our list of concerns regarding NVDA,” analyst Gil Luria wrote in a note. He said Nvidia remains central to the AI trade, with growth likely to continue into next year and beyond.

Luria pointed to risks including hyperscaler capex trends, custom silicon like Google’s TPUs, softer demand in China, and supply challenges across energy and chipmaking.

Still, he emphasized that “the most important thing – the overwhelming growth in demand for compute – is the only thing that matters.”

“NVIDIA should be able to sustain growth over the next two years, regardless of which segment that growth comes from,” Luria said, adding that investors are likely to look past minor earnings misses, as they have in recent quarters.

At about 28 times projected fiscal 2026 earnings with profits climbing near 40%, Nvidia may now be “the least expensive direct investment in the growth of AI,” according to Luria.

He compared the stock with Apple, which D.A. Davidson downgraded to Neutral, noting both trade at similar multiples, though Apple’s expected earnings growth is just 9%.

“While AAPL may still offer defense in an uncertain environment, we prefer to go on offense, given the prospects for AI compute,” he concluded.

Apple downgraded at Phillip Securities on valuation, weak AI prospects

Brokerage Phillip Securities downgraded Apple (NASDAQ:AAPL) shares to Reduce from Neutral this week, citing stretched valuation and near-term challenges that overshadow the impact of its latest product launches. The price target was kept at $200.

The call comes in the wake of Apple’s rally over the past three months, outpacing the Nasdaq’s gains.

“We maintain a cautious outlook on Apple, due to near-term headwinds from tariffs, elevated CAPEX, and no significant AI innovation to help with persistent weakness in products and the China market,” analyst Helena Wang said.

At its September 9 “Awe-Dropping” event, Apple introduced the iPhone 17 lineup, led by the ultra-thin iPhone Air at 5.6 mm, alongside Pro and Pro Max versions powered by the new A19 Pro chip.

Other updates included enhanced cameras, tougher Ceramic Shield glass, AI-enabled AirPods with real-time translation, and the Apple Watch Series 11 featuring hypertension detection.

Wang said that while Apple delivered hardware enhancements, “most remain incremental rather than disruptive.” She noted the Siri revamp has been delayed until 2026, leaving the company trailing rivals in AI.

"We continue to see limited evidence of a strong upgrade cycle, notably as Apple lags peers in AI," she wrote.

The analyst also cautioned that the iPhone Air “may divert demand away from the iPhone 17 Pro and Pro Max, rather than growing Apple’s addressable market.” Pricing for the new range was held flat, with the entry model starting at $799 but offering 256GB of storage instead of 128GB.

Absorbing tariffs and higher production costs is expected to weigh on profitability, Wang said, with gross margins already narrowing by 140 basis points year-on-year in the June quarter.

Barclays lifts S&P 500 targets on earnings strength, upgrades tech outlook

Meanwhile, Barclays raised its earnings and price targets for the S&P 500, citing stronger-than-expected first-half results and resilient earnings despite trade and labor pressures.

The bank now sees the index reaching 6,450 by end-2025, up from 6,050, based on EPS of $268 versus $262 previously.

For 2026, the target was lifted to 7,000 from 6,700, on EPS of $295 compared with $285 earlier.

“Strong corporate earnings and AI-centric growth offset by emerging labor market risks,” strategists led by Venu Krishna said, noting that three expected Federal Reserve rate cuts this year should help balance risks in the U.S. economy.

Earnings have been beating forecasts, with Big Tech and Financials driving much of the momentum. Tariff impacts have been “less severe than initially anticipated,” Barclays said, though some effects may carry into 2026. New tax provisions are also expected to support GDP growth through 2026.

The bank described consensus forecasts as “overly optimistic,” projecting $268 in EPS for 2025 versus the Street’s $269, and $295 for 2026 against consensus at $307.

Sector positioning was revised, with Technology upgraded to Positive, including a shift in the “Rest of Tech” category, as disruption concerns in software appear overdone and data center demand remains strong.

Financials also remain Positive, while Healthcare and Materials were cut to Neutral. Consumer, Industrials, and Energy stayed at Negative.

Barclays flagged macro risks, especially a weakening labor market with unemployment at a three-year high, but said equities should benefit from rate cuts and favorable seasonality.

“Macro is under pressure, but we take the ’glass half full’ view,” the strategists wrote.

Mizuho ups Broadcom target on accelerating AI growth trajectory

Mizuho Securities raised its price target on Broadcom (NASDAQ:AVGO) to $410 from $355, pointing to stronger momentum in the company’s AI business, as well as gains in custom silicon and networking.

Analysts boosted their AI revenue outlook, forecasting $39 billion for fiscal 2026 (FY26), $60 billion for 2027, and $75 billion for 2028. That compares with consensus estimates of $36 billion, $55 billion, and $62 billion, respectively.

They now see total FY26 revenue at $84.4 billion versus $79.6 billion previously, with EPS of $9.27 compared with $8.68.

For FY27, revenue is projected at $108 billion with EPS of $12.13, while new FY28 estimates stand at $124 billion and EPS of $14.05.

The broker sees AI revenues compounding at about 56% annually between 2025 and 2028, supported by rapid adoption of custom ASICs, growing customer relationships, and expansion of its ScaleUp and ScaleOut networking platforms.

Broadcom’s custom chips for hyperscalers such as Google and Meta are driving higher average selling prices, with additional ramps expected from new customers including OpenAI, Apple, and ARM.

Products such as the Tomahawk Ultra and SUE-lite networking solutions are also seen extending Broadcom’s reach in AI connectivity, cutting latency and power consumption while boosting efficiency in large-scale training and inference.

Mizuho projects free cash flow could reach $40 billion annually by FY26, with margins remaining among the strongest in the industry at about 77% gross and 66% operating.

The analysts also noted that CEO Hock Tan’s incentive plan is tied to AI-driven revenue milestones of $90 billion, $105 billion, and $120 billion by 2030.

They expect AI growth to “potentially accelerate” in calendar 2027 and beyond.

Oracle raised to Buy at BofA as AI infrastructure momentum builds

Much of the spotlight last week was on Oracle (NYSE:ORCL), whose shares jumped 36% on Wednesday after an exceptional quarterly report.

The results prompted Bank of America to upgrade the stock to Buy from Neutral and lift its price target to $368 from $295, pointing to the company’s strengthening position in AI infrastructure after a strong first-quarter performance.

The company’s remaining performance obligations jumped 230% quarter-on-quarter, a pace BofA called “exceptional,” underscoring Oracle’s role as a “key AI enabler.” Analysts said that while returns on rising capital expenditures are still uncertain, demand signals from Oracle Cloud Infrastructure (OCI) are too strong to overlook.

The bank projects a 51% four-year CAGR for OCI revenues.

“Although profitability of AI workloads remains a key debate, it is clear that Oracle is capturing share in the large and rapidly growing market for AI infrastructure (we estimate that the AI applications industry alone will represent $155 billion by 2030),” analyst Brad Sills said.

He cited top-tier AI clients including OpenAI, xAI, Meta, NVIDIA, and AMD as evidence of Oracle’s rising influence.

“Oracle is clearly leveraging a number of advantages in its cloud software/hardware businesses to attract the largest of the AI enterprises,” the analyst wrote.

Oracle’s capital spending is expected to reach $35 billion in fiscal 2026, up from more than $25 billion previously. Sills estimates AI-related investments could yield “a solid low 50s topline return in FY27,” comparable to specialized AI infrastructure providers.

He added that Oracle’s “engineering-first” culture and track record in high-performance software and hardware give weight to its lower-cost compute claims.

BofA also highlighted Oracle’s ability to combine AI infrastructure with its core database and applications portfolio, creating a potential one-stop shop for customers and expanding managed services opportunities.

The bank shifted its valuation framework to an EV/sales multiple, applying 12.4x on CY27 estimates—a premium to large-cap software peers—arguing Oracle’s competitive moat is strengthening despite questions on long-term margins.