Alphabet Inc. (NASDAQ: GOOGL) recently released its latest earnings report, and while it failed to meet high expectations, the tech giant demonstrated accelerating growth across all key business segments. Analysts at BofA Securities noted that despite falling short of expectations, Alphabet is well-positioned to capitalize on the ongoing Artificial Intelligence (AI) boom.
In their commentary on the earnings report, BofA Securities analysts highlighted the positive impact of Gen-AI integrations and the company’s robust base of AI assets. They expressed their belief that Alphabet will ultimately benefit from the AI trend. Furthermore, they anticipate cleaner expense quarters 2024, with fewer restructuring and legal expenses.
Morgan Stanley analysts also chimed in, emphasizing Microsoft Corporation’s (NASDAQ: MSFT) leadership in generative AI. They noted Microsoft’s ability to monetize this technology effectively, with year-over-year EPS growth of 23% in FY2Q24 and positive EPS revisions for FY24.
Morgan Stanley remains optimistic about Microsoft’s position in the emerging GenAI wave, projecting an 18% compound annual growth rate in earnings per share (EPS) through fiscal year 2026.
Alphabet’s future in AI
Alphabet, the parent company of Google, has been a prominent player in the tech industry, with a significant presence in various sectors. While the latest earnings report may have fallen short of investor expectations, the company’s focus on AI remains a promising avenue for future growth.
Gen-AI integrations, which involve the incorporation of AI technologies into various aspects of Google’s services and products, could potentially drive Alphabet’s future success. With a strong foundation of AI assets, the company is well-positioned to leverage the ongoing AI boom.
Investors are keeping a close eye on Alphabet’s ability to harness the power of AI to create innovative solutions and enhance its existing products and services. The company’s commitment to AI development and integration could be key to its long-term success.
Microsoft has consistently demonstrated its prowess in generative AI, showcasing its unique ability to monetize this technology effectively. The company’s recent financial results have been impressive, with significant year-over-year EPS growth.
Investors are rewarded with strong financial performance, and Microsoft’s ability to capitalize on the ongoing AI trend has bolstered its position in the tech industry. The company’s commitment to innovation and its capacity to turn AI technology into profitable ventures have garnered the attention of analysts and investors alike.
Morgan Stanley predicts an 18% compound annual growth rate in EPS through fiscal year 2026, highlighting the positive outlook for Microsoft as it continues to lead in generative AI.
Valuation concerns for advanced microdevices
Raymond James recently downgraded Advanced Micro Devices Inc. (NASDAQ: AMD) from Strong Buy to Outperform while raising the price target to $195 from $190. Valuation concerns primarily drive the downgrade.
Raymond James analysts pointed out that AMD’s stock is already trading at a relatively high multiple of 33 times 2025 estimated earnings per share (EPS). According to their analysis, the stock is pricing approximately a 20% unit share for AI Graphics Processing Units (GPUs), specifically the MI300.
To justify this valuation, AMD would need to add more than $3 to its EPS, which corresponds to revenue of approximately $12 billion or sales of around 800,000 units of AI GPUs. The investment firm expects AMD’s core business to generate earnings of $3.5 to $4 per share in 2025, highlighting the company’s significant challenge in achieving this goal.
Bank of America’s positive outlook on NVIDIA
Bank of America analysts have raised the price target on NVIDIA Corporation (NASDAQ: NVDA) to $800 from $700, reaffirming their Buy rating and Top Pick status on the stock. They cite “compelling valuation” as the basis for their positive outlook.
Analysts anticipate a moderate increase of 3% to 5% in the reported FQ4 results and the FQ1 guidance. Gains from additional supply primarily drive these estimates, though they acknowledge limitations in China and some transitional impacts before the launch of the B100 accelerator in the second half of 2024.
While the projected beat may be more measured than in previous quarters, analysts believe this pace will create a more sustainable environment for continued growth in 2025 and beyond.
Palantir faces mixed prospects
Jefferies analysts have maintained an Underperform rating and a $13.00 price target on Palantir Technologies Inc. (NYSE: PLTR) ahead of its fourth-quarter earnings report. The analysts point out a mixed picture for the company, with challenging commercial sector growth targets and tempered government sector growth expectations.
Investor sentiment remains negative, with concerns about the company’s current valuation. Palantir’s shares trade at a relatively high multiple, and analysts express doubts that the stock can deliver the expected upside from AI projects. They suggest that investors may find better opportunities for exposure to AI in other companies.
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