In this article, we will take a detailed look at the Top 10 Latest AI News, Earnings and Analyst Ratings You Should Not Miss.
Tech stocks are continuing to decline amid fears the Fed is taking too long to begin interest rate cuts, stoked by the latest jobs data that showed unemployment is rising. However, some analysts believe the latest decline in AI stocks is part of a normal market rotation and gives investors an opportunity to buy. While talking to CNBC in a latest program, Michael Landsberg of Landsberg Bennett Private Wealth said that the latest decline is a “little bit of a reset, obviously.” The analyst said that AI stocks had a “great run” and the latest pullback is a “typical process” of market rotation.
“It doesn’t mean we are not positive longer term on AI but when you have big runs like that that’s why you rebalance portfolios to keep the risk in check,” Landsberg said.
Asked if the AI bubble has popped and this is the end of the AI hype, the analyst said “absolutely not” and called the recent pullback “deceleration” from growth and “normalization.”
Landsberg said that the earnings season will “separate the wheat from the chaff” and believes major tech companies will still drive earnings in the future.
Photo by Campaign Creators on Unsplash
For this article, we scanned the latest AI news, earnings, and analyst ratings and picked the 10 biggest stocks moving on these developments. With each company, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Intel Corp (NASDAQ:INTC)
Number of Hedge Fund Investors: 77
Intel Corp (NASDAQ:INTC) shares recently saw a bloodbath following the company’s weak Q2 results and disappointing guidance. The results show the AI growth everyone was talking about won’t come cheap. Intel Corp (NASDAQ:INTC) expects its gross margin in the third quarter to decline to 34.5% from 38.7% reported in the second quarter, which was a significant decline from the company’s expectation of 43.5%.
While Intel Corp (NASDAQ:INTC) has suspended its dividend and announced massive layoffs, its problem of inventory won’t be resolved anytime soon. Intel has 137 days of inventory, worth over $11.2 billion. This is much higher than the industry average of 90 days. Intel Corp (NASDAQ:INTC) has close to $52 billion in long-term debt and analysts believe its cost-cutting measures along with AI growth initiatives won’t let it fix this problem soon. S&P Global recently put the stock’s credit rating on “watch” saying:
“While these cost-cutting measures, including significant capital expenditure reductions, could alleviate some near-term cash-flow-generation challenges, it is unclear whether these steps will be sufficient to maintain its business competitiveness and enable healthy growth.”
Raymond James said in a report after earnings that Intel’s margin issues are expected to continue until 2025. AI PC growth has become a larger headwind for margins, as the higher cost of external wafers offsets modest average selling price premiums.
Amid these factors, investors are better off looking for other AI stocks and avoid Intel for now until there’s visibility on how exactly Intel Corp (NASDAQ:INTC) would resolve its core problems.
ClearBridge Large Cap Value Strategy stated the following regarding Intel Corporation (NASDAQ:INTC) in its Q2 2024 investor letter:
“The massive ramp up in spending on AI spending has crowded out spending in other technology verticals such as software and traditional enterprise infrastructure. This has also driven a market where “AI winners” have enjoyed strong multiple expansion, while perceived “AI losers” have been severely punished. One example of a perceived AI loser temporarily cast aside was the Strategy’s top detractor for the quarter, Intel Corporation (NASDAQ:INTC), whose shares declined as it put out financial targets for 2027 that were below Wall Street expectations, and also noted that demand for its core PC and server chips remained depressed. We take a contrarian view of Intel and do not think it will be an AI loser, but rather see underappreciated opportunity as AI PCs ramp over the next few quarters in enterprises, where Intel has a stronghold. We also believe that the company’s technology roadmap remains intact, which we believe will lead to a stabilization in market share in its core PC and server markets. Both markets remain depressed, but we believe that aging infrastructure and the ongoing growth of IT workloads will lead to a cyclical recovery in both markets, which should benefit shares.”
9. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 90
Bank of America Savita Subramanian recently said in a latest note that AI “hype days are over” as he pointed out major AI tech companies that are spending huge amounts of money. The analyst said the AI has transitioned from “tell me” to “show me” and from now on companies that are monetizing AI will lead. The analyst named ServiceNow Inc (NYSE:NOW) as one of the companies that have already started monetizing AI.
ServiceNow Inc (NYSE:NOW) impressed the market with strong second-quarter results which have proved the company’s AI potential. Morgan Stanley’s Keith Weiss maintained his Overweight rating on the stock and a $900 price target, saying the AI momentum is real and continues to build. ServiceNow Inc (NYSE:NOW) said additional annual revenue from new Pro Plus edition contracts, which include generative AI features, doubled from the previous quarter. The company secured 11 new contracts worth over $1 million each. Analysts believe ServiceNow Inc (NYSE:NOW) strength is its NOW platform as it makes it easier for companies to integrate all tools and software at one place, including Salesforce, Microsoft, and SAP. The company’s portfolio has 168 digital workflow solutions with a 98% renewal rate.
In a tough environment for SaaS companies, ServiceNow Inc (NYSE:NOW) managed to raise its full-year guidance. It also raised its operating income by 50 basis points.
NOW is trading at 40 times its estimated earnings for 2025, which is not a high multiple when compared with over 20% revenue growth estimates for ServiceNow Inc (NYSE:NOW) and an increasing number of growth catalysts.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
8. Adobe Inc (NASDAQ:ADBE)
Number of Hedge Fund Investors: 108
Bank of America Savita Subramanian said in a note that from now on tech companies that are monetizing AI would “lead” the AI cycle as he believes AI “hype days” are over. The analyst named Adobe Inc (NASDAQ:ADBE) as one of the companies monetizing AI.
Recently, Deutsche Bank also added Adobe Inc (NASDAQ:ADBE) to its Fresh Money list and gave the stock bullish comments amid AI catalysts.
Deutsche Bank believes the company’s creative cloud division is expected to grow along with generative AI products kicking in.
“We believe this creates an opportunity to see positive estimate revisions along with multiple expansion as the narrative flips to Adobe Inc (NASDAQ:ADBE) once again a gen AI beneficiary.”
The firm raised its price target on the stock to $650.
Mizuho analyst Gregg Moskowitz also said in a fresh note that the “breadth of” AI monetization of Adobe Inc (NASDAQ:ADBE) is being “underappreciated” by the market.
Adobe shares rose after the company posted a strong Q2, putting an end to skeptics’ narrative which said the company’s editing tools were under threat from the generative AI revolution. JPMorgan upgraded the stock to Overweight from Neutral after the Q2 results and upped its price target to $580 from $570.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
7. Advanced Micro Devices, Inc (NASDAQ:AMD)
Number of Hedge Fund Investors: 124
Advanced Micro Devices, Inc (NASDAQ:AMD) impressed Wall Street with solid second-quarter results amid strong data center revenue. Data center revenue in the period grew 49% year over year.
But can Advanced Micro Devices, Inc (NASDAQ:AMD) continue gaining in the coming months? Analysts are hopeful amid the launch of its Instinct™ MI300 Series accelerators that are designed for AI and HPC workloads. The new chip competes with Nvidia’s H100 AI chip. Advanced Micro Devices, Inc (NASDAQ:AMD) now plans to release new AI chips annually, including the MI325X in Q4 this year, the MI350 in 2025, and the MI400 in 2026. Advanced Micro Devices, Inc (NASDAQ:AMD) said MI350 would be a competitor to Nvidia’s Blackwell.
Advanced Micro Devices, Inc (NASDAQ:AMD) data center business doubled its revenue but this growth was not at the cost of profits. The segment’s operating income increased by 405% compared to the year-earlier period. However, Advanced Micro Devices, Inc (NASDAQ:AMD) data center business is still very small compared with NVDA. It generated about $2.8 billion in revenue vs. $22.6 billion in quarterly revenue for NVDA. However, Advanced Micro Devices, Inc (NASDAQ:AMD) CPU and GPU businesses are also thriving. Ryzen CPU sales increased 49% over year and slightly quarter over quarter. Although gaming revenue declined 59% due to decreased PlayStation and Xbox sales, Advanced Micro Devices, Inc (NASDAQ:AMD) Radeon 6000 GPUs saw a year-over-year sales increase.
Advanced Micro Devices, Inc (NASDAQ:AMD) is trading 17% below its 3-year average P/E ratio. The company is estimated to grow its EPS by 43% in the long term, compared to 33% for Nvidia. During the third quarter, its revenue growth is expected to come in at 15% on a QoQ basis. Amid growth forecasts based on new chips and an expected increase in AI spending by other companies, Advanced Micro Devices, Inc (NASDAQ:AMD) forward P/E of 38 makes the stock undervalued at the current levels.
6. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 150
Apple Inc (NASDAQ:AAPL) is in the limelight after the company posted decent quarterly results, where declines in iPhone sales were more than offset by services revenue and Mac sales gains. Dan Ives of Wedbush reiterated an Outperform rating on the stock and increased his price target to $285 from $275.
“Apple Inc (NASDAQ:AAPL) Intelligence rollout has already begun with developers who will significantly enhance app capabilities as the company staggers the launch of its new AI feature along with its OpenAI partnership which Apple Inc (NASDAQ:AAPL) expects ChatGPT and all other features to be integrated into the iPhone and other devices by the end of the year. We believe AI technology being introduced into the Apple ecosystem will bring monetization opportunities on both the services as well as iPhone/hardware front and adds $30 to $40 per share.” Ives said.
Bank of America analyst Wamsi Mohan said he sees more upside for Apple Inc (NASDAQ:AAPL) in the December quarter and next year on the back of Apple Intelligence. The analyst reiterated a Buy rating and $256 price target on Apple.
He said Apple Inc (NASDAQ:AAPL) estimates could be revised higher due to “multi-year iPhone upgrade cycle, tailwinds to gross margins and strong cash flows.”
Morgan Stanley expects Apple Inc (NASDAQ:AAPL) to ship nearly 500 million iPhones in the next two years, marking a 6% increase from the FY21-FY22 cycle. Morgan Stanley said this growth can boost the annual iPhone average selling price (ASP) by 5%, leading to nearly $485 billion in revenue and $8.70 in earnings per share by FY26, exceeding consensus estimates by 7-9%.
Wall Street is expecting a new AI-powered refresh cycle for iPhones because it’s been years since millions of users upgraded their iPhones. Wedbush recently said 270 million, of 1.5 billion iPhones, have not upgraded in 4+ years
Apple Inc (NASDAQ:AAPL) is also training Siri based on its own language models. These smaller models run on devices, handling various daily tasks, with Apple revealing its on-device model has 3 billion parameters. For more complex tasks, a larger language model runs on Apple Inc (NASDAQ:AAPL) private servers, though its size is undisclosed and likely smaller than current large language models like OpenAI’s GPT-4, which has around 1.8 trillion parameters.
Polen Focus Growth Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The largest relative detractors in the quarter were NVIDIA, Apple Inc. (NASDAQ:AAPL), and Salesforce. In a reversal from some of the concerns driving the stock down in the first quarter, Apple re-emerged as a top performer in the second quarter. The company reported better-than-feared results in its iPhone segment that quelled concerns over weakness in China. Additionally, the company forecast a return to sales growth and announced a $110 billion stock buyback plan, the largest in U.S. history. Later in the period, at its Worldwide Developers Conference, Apple introduced long-awaited new AI features that spurred some optimism around an upgrade cycle for the iPhone and, more generally, the important role Apple may be able to play in the emerging AI landscape. We continue to study Apple closely, which we previously owned the company for many years during its growth phase, to determine if it is poised for another significant revenue and earnings growth period.”
5. Alphabet Inc Class C (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Wedbush analyst Scott Devitt said in a fresh note that OpenAI’s SearchGPT will likely remain an “overhang” for Google as investors find out the possible impact of the tool on Google’s search business. The analyst however said Google’s search business is “highly defensible” and Alphabet Inc Class C (NASDAQ:GOOG) search advancements are underappreciated by the market.
“We think the advantages of this existing infrastructure are understated and overlooked and we continue to believe Alphabet Inc Class C (NASDAQ:GOOG) is best positioned to optimize generative AI search results for usability, monetization, and cost.”
Devitt reiterated an Outperform rating for the stock and $205 price target.
Deepwater’s Gene Munster thinks that Alphabet Inc Class C (NASDAQ:GOOG) is going to win the “AI arms race.” While talking to CNBC, the analyst said that Google search business is “intact, no need to worry.” Munster’s thesis is based on his in-depth testing of several large language models and chatbots including Google’s Gemini. Munster also thinks other chatbots do not offer a strong imperative for users to switch from Google search as of yet.
Wedbush’s Dan Ives in a fresh note named Alphabet Inc (NASDAQ:GOOG) as one of the stocks that can benefit from the AI boom.
According to a latest UBS report, Alphabet Inc (NASDAQ:GOOG) falls in all three layers of the AI value chain – enabling, intelligence and application layer. Alphabet Inc (NASDAQ:GOOG) is an AI enabling player because of its Tensor Processing Units (TPUs) and Google Cloud Platform, while Gemini makes it a key player in the intelligence layer. On the application layer, UBS believes Alphabet Inc (NASDAQ:GOOG) has an edge with its Duet AI assistant and advertising. All these catalysts make Alphabet Inc (NASDAQ:GOOG) a company that could benefit from the $1.2 trillion AI opportunity by 2027, UBS said.
Alphabet Inc. (NASDAQ:GOOG) bulls believe the company is just getting started with AI product launches. Alphabet Inc. (NASDAQ:GOOG) is indeed in a strong position to develop an AI ecosystem around its products. For example, demos have shown that Gemini app will help people perform daily personal tasks like note-taking, appointments, writing, etc. These features could easily be integrated with other Google apps. Alphabet Inc.’s (NASDAQ:GOOG) app urges users to sign up for ‘Google One AI Premium’ plan, which has a $19.99 price tag.
Conventum – Alluvium Global Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG), ie Google / YouTube, returned 20.8%. Although management reported good news – solid quarterly results, the expectation of margin expansion throughout 2024, as well as a maiden dividend (to add to its share repurchases) – we suspect the share price bounce was as much related to AI euphoria as it was to that positive news. From our perspective, the figures were largely as expected and there was no cause for us to change our assumptions nor estimates. Clearly Alphabet now trades at a larger premium to our valuation, but given the conservativeness of that valuation, in our view the premium is still not so much as to warrant selling. It represents 5.3% of the Fund.”
