5 big analyst AI moves: Arm impresses; key year for Baidu; Gemini Ultra hype

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.

Jefferies impressed with Arm , expects AI momentum to continue

UK-based chipmaker Arm Holdings ADR (NASDAQ:ARM) soared 60% in the past week as investors scrambled to buy the company’s shares in the wake of its impressive FQ3 results and guidance.

Amidst this optimism, Jefferies analysts raised forecasts on ARM and hiked their target price to $115 from $98.

“Stronger-than-expected FYQ3 results and FYQ4 guidance reinforces our view that ARM is a key beneficiary of rising demand for edge AI devices, especially premium smartphones,” they said.

“Royalty growth is forecast to accelerate due to a faster transition to devices using V9 architecture, which has double the royalty rates of V8. AI is also driving higher chip design activity and, therefore, higher licensing revenue.”

Morgan Stanley lifts estimates on Nvidia, cites ‘very strong near-term picture’

The excitement surrounding NVIDIA Corporation (NASDAQ:NVDA) continues unabated.

Despite surging 50% since the start of 2024, Wall Street remains confident that NVDA, a key player in the ongoing AI boom, has more to offer.

On Wednesday, Morgan Stanley analysts raised their estimates on the chipmaker, citing “a very strong near-term picture.” In the long run, cloud commentary remains encouraging, though the broker expects a plateau in 2025.

“We remain very comfortable with the competitive dynamic despite the enthusiasm for alternatives,” analysts wrote in a note.

“The 2025 picture is a tougher call - we expect another very strong training year, but it remains to be seen if that drives incremental growth for training from what is already more than 30% of cloud budgets in CY24,” they added.

Bernstein analyst: 2024 is Baidu’s “make or break” year

Elsewhere, Chinese technology and AI giant Baidu Inc (NASDAQ:BIDU) is facing a “make or break” year, according to Bernstein analysts.

Specifically, the company is striving to expand its AI capabilities across its business operations while facing intensified competition from AI enhancements.

Analsyts said there are three primary aspects of Baidu's AI strategy that investors should examine to either confirm or refute the investment rationale.

First, Baidu must secure additional ad revenue through search optimization in a mature market, requiring a significant gain in market share and improved conversion rates, they said.

Secondly, the success of its revamped AI-integrated apps is crucial for increasing user engagement and transitioning to transaction-based monetization, necessitating a standout app experience.

“To succeed here, Baidu will need to execute flawlessly with a “killer’ app experience AND demonstrate the ability to drive CPS user engagement (an area they have not had success in to-date.),” they wrote.

Lastly, in the cloud sector, Baidu's ability to maintain its lead hinges on the QianFan AI developer platform's appeal to developers, aiming for differentiation without engaging in a price war, to shift the cloud market share in its favor.

BofA elevates Palantir PT to $24 amid robust AI demand

Earlier in the week, BofA Securities analysts lifted the target price on Palantir Technologies Inc (NYSE:PLTR) from $21 to $24 and reiterated a Buy rating.

Citing the strong surge in US commercial sales and the addition of 40 new customers during FQ4, Mora said Palantir’s AI platform (AIP) is “still in its infancy and already contributing in a meaningful way.”

“We expect the momentum to continue. We think this remarkable growth is a sign of Palantir’s unique position as an enabler of AI-powered data-driven decision making in a tangible, accessible, and operational way,” analysts said.

Moreover, the potential for growth within the US Government (USG) sector remains substantial.

As software becomes ever more essential to military operations, major contractors appear to be falling behind. The increase in USG sales is expected to be driven by various elements, such as a robust portfolio of ready-to-deploy solutions to meet the fast-paced demand for software and the deepening of customer relationships, among other factors.

Citi bullish on Google’s Gemini Ultra, raises target price

Google owner Alphabet Inc Class A (NASDAQ:GOOGL) introduced Gemini Ultra this week, its most advanced large language model (LLM) yet.

Nearly a year ago, the tech behemoth launched Google Bard, its hurried response to OpenAI’s ChatGPT. However, Bard will now be replaced by Gemini Ultra, which Citi analysts believes has “multiple potential benefits.”

The analysts highlighted three key advantages Alphabet’s new LLM provides, including 1) an increase in product innovation with the launch of new Gemini-based products across search, ads, and enterprise; 2) enhanced adoption of Google's GenAI tools, leading to improved search efficiency, more comprehensive results, and broader query responses; and “3) a more cohesive strategy with one brand across Google."

Analysts reaffirmed a Buy rating on GOOGL and raised the price target to $168.

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