Key points
- Truist upgrades AMD to “Buy”, citing strong AI momentum and increased hyperscale partnerships.
- UBS warns of AI stock valuations approaching levels last seen during the dot-com bubble, citing risks and the potential for cash flow disappointments.
- BofA downgrades Marvell to “Neutral” due to softer AI growth outlook and uncertainty around key projects.
- Wall Street initiates coverage on Ambiq Micro, with differing opinions on its long-term profitability and growth potential.
Truist’s bullish outlook on AMD contrasts sharply with UBS’s cautionary note on overall AI stock valuations. This week saw significant analyst movement in the AI sector, highlighting the rapidly evolving landscape and inherent uncertainties. Truist Securities upgraded Advanced Micro Devices (AMD) to a “Buy” rating, driven by positive industry feedback on its data center and AI performance.
Analysts noted a shift in hyperscale customer perception of AMD, moving from a “price check” against Nvidia to a genuine partner for large-scale deployments. This mirrors AMD’s previous success in server CPUs, leading Truist to project a sustainable 10% market share in GPUs.
However, UBS issued a warning about the soaring valuations of AI stocks, drawing parallels to the dot-com bubble. The bank’s proprietary HOLT Economic model indicates that current market values heavily rely on future cash flow expectations rather than present earnings, leaving little room for disappointment.
Concerns were raised regarding massive capital expenditures, data center energy limitations, and increasing competition from China. A recent MIT study further supports this caution, revealing that 95% of generative AI pilots have failed to deliver immediate revenue growth. These factors prompted UBS to recommend diversification of its portfolio.
Adding to the mixed signals, Bank of America downgraded Marvell Technology (MRVL) to “Neutral,” citing a less optimistic outlook for the company’s AI growth through 2026. This downgrade is partly attributed to increased uncertainty surrounding Microsoft’s Maia project and Marvell’s role in Amazon’s next-generation chip program.
The revised forecast resulted in a significant reduction in projected sales. Despite this, BofA acknowledged Marvell’s valuation support and financial flexibility.
Meanwhile, Ambiq Micro (AMBQ), a low-power chipmaker, received mixed reviews from Wall Street analysts following its IPO. While Stifel initiated coverage with a “Buy” rating, citing Ambiq’s competitive advantage, UBS and BofA adopted a more cautious “Neutral” stance, expressing concerns about profitability and customer concentration.
The differing opinions reflect the inherent uncertainties and challenges in evaluating a newly public company operating in a rapidly evolving sector.
Lastly, RBC Capital Markets countered the prevalent belief that AI would render traditional software obsolete, highlighting the opportunities for existing players to leverage their data and distribution networks to monetize AI advancements.
