SK Hynix hit by double downgrade; ADI was named a Top Semis Pick by Investing.com

Investing.com — Here are the biggest artificial intelligence (AI) analyst moves for the week.

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William Blair starts coverage of ARM, AVGO at Buy

During the week William Blair analysts initiated coverage on Arm Holdings (NASDAQ: ) with an Outperform rating, expressing confidence in the company’s potential for strong earnings per share (EPS) growth and stock price appreciation over the coming years.

The firm pointed to several growth drivers for Arm, including “1) higher average selling prices (ASPs) driven by improved monetization and higher IP value; 2) share the gains in newer markets such as the data center; 3) tailwinds from AI lead to higher demand for general computing; and 4) a new mobile/PC upgrade cycle.”

While Arm’s shares are trading at a premium compared to its peers, William Blair believes this is justified by the company’s robust growth outlook, which is expected to become clearer in its financial forecasts for 2026 and 2027.

Their updated cash flow analysis points to around 35% upside potential for Arm shares, supported by sustained revenue growth and rising profitability over the next decade.

In a separate note, William Blair also assigned an Outperform rating to Broadcom (NASDAQ: ), noting the company’s strategic expansion into software as a way to protect the cyclical nature of the semiconductor industry.

The firm believes the chipmaker is positioned for continued growth, driven by AI-related demand in the networking and custom chip segments, along with a shift to subscription-based models at its VMware (NYSE: ) division.

Analysts pointed out that nearly two-thirds of VMware’s customers have switched to subscriptions, a significant increase from the 30% seen before the acquisition.

They also noted that AVGO trades at a price-to-earnings ratio of 26x and an enterprise value-to-free cash flow ratio of 22x based on their 2025 forecast, slightly below the median of its peers.

“We see room for multiple expansion as the sustainability of growth in networks, customer AI chips and software becomes clearer,” the note said.

Morgan Stanley double-downgraded SK Hynix on cloudy outlook beyond Q4

Shares of SK Hynix (KS: ) fell on Thursday following a double downgrade by Morgan Stanley, with analysts changing their rating from overweight to underweight.

In a note, analysts noted that “the sun is still shining” for the company at this time. They predict 2024 will be another strong year for SK Hynix, driven by fourth-quarter DRAM price growth, which should lead to “outstanding near-term earnings.”

However, the outlook beyond the fourth quarter looks less favorable. While the long-term potential for DRAM, particularly due to AI-driven demand in data centers, is still promising, the firm noted that cyclical shortages are coming to an end.

“Looking beyond 4Q24, we see sustained risks to the top line and EPS as growth slows, prices fall and increasing competition in high bandwidth memory (HBM) challenges long-term sustainable margins,” the analysts added.

In addition to downgrading the stock, Morgan Stanley cut its price target for SK Hynix by more than half, from 260,000 to 120,000 Korean won.

Name of Citi Analog devices his new top pick in the semifinals

In a research note issued on Tuesday, analysts at Citi named Analog Devices (NASDAQ: ) as their new top pick in the semiconductor sector.

The decision comes after Citi updated its semiconductor stock rankings chart, which included a price target adjustment for Micron Technology (NASDAQ: ) and an update to Texas Instruments (NASDAQ: ) . The firm maintains a positive outlook on the semiconductor industry as a whole.

Citi highlighted ADI’s low risk in the automotive sector compared to other analog semiconductor makers, particularly following the company’s recent earnings report.

This reduced risk, according to Citi, makes ADI well-positioned amid ongoing market uncertainties, which led the firm to place it at the top of its chart of semiconductor stocks.

“ADI is our top pick,” Citi analysts said, adding that they see “lower downside risk in Autos relative to other analog names given that they just reported earnings.”

Broadcom and AMD (NASDAQ: ), both key players in the AI ​​sector, remain second and third respectively for Citi.

AI revolution trading gets a boost after Fed cut: Wedbush

Wedbush analysts said they believe trade in the AI ​​revolution has gained momentum following the Federal Reserve’s 50 basis point rate cut, signaling a favorable environment for Big Tech and AI stocks.

Wedbush believes that this aggressive rate cut, along with a dovish dot plot extending to 2025, creates a “very bullish backdrop” for the tech sector.

The Fed’s move marks an important shift, as many investors had been waiting for this signal to fully commit to tech growth stocks heading into 2025.

The firm pointed out that the broader technology sector remained resilient, with recent earnings reports such as those from Oracle indicating that the AI ​​revolution is entering the software and application phase.

Recent observations from Asia suggest that the technology supply chain is poised for significant expansion, spurred by an estimated $1 trillion in capital spending on AI in the coming years.

Nvidia (NASDAQ: ) remains at the forefront of this revolution, with its GPUs described by Wedbush as the “new oil and gold” of the IT industry.

With the Federal Reserve’s rate-cutting cycle underway and spending on artificial technologies beginning to accelerate, Wedbush analysts continue to have a bullish outlook for tech stocks, expecting further gains in 2025.

Melius Research upgrades Oracle stock to Buy

Meanwhile, analysts at Melius Research upgraded Oracle Corporation (NYSE: ) from Hold to Buy, setting a price target of $210.

They point out that Oracle founder Larry Ellison and CEO Safra Catz are not only leveraging their influence, but also taking a more strategic approach through partnerships, positioning Oracle’s AI-first Cloud as a key driver of growth.

Ellison’s strong connections in the tech world, including access to GPUs and deals with Cloud CEOs, along with his friendship with client Elon Musk, played a role, Melius’ team notes.

While Oracle stock is up 54% year-to-date, analysts at the company believe this update may not be long in coming, suggesting the stock could be in the midst of a higher move.

“We see close to $8.50 in 2-year EPS run rate — and with our biggest concerns mitigated — it’s hard not to put a 25x multiple on a company that’s going to grow more faster than Salesforce (NYSE: ) and Adobe ( NASDAQ: ),” they said.