Author: admin

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

Jefferies analyst Brent Thill said in a note this week that Microsoft Corporation (NASDAQ:MSFT) recent share-price pullback has opened up an appealing buying opportunity, pointing to the company’s backlog, AI partnerships and cloud momentum as key pillars of a strong multi-year growth outlook in large-cap technology.

Thill noted that the stock has fallen 18% since the first fiscal quarter (F1Q), despite Microsoft’s disclosure of $250 billion in commitments to OpenAI and $30 billion tied to Anthropic. He adds that the current valuation of “23x CY27 EPS” now sits below Amazon and Google “despite superior visibility.”

The analyst argues that Microsoft’s record contractual commitments are the main reason to step in at current levels. He expects second-quarter remaining performance obligations to deliver “the largest sequential step-up ever,” driven by the OpenAI and Anthropic agreements.

Those deals, Thill said, reinforce “unprecedented multi-year demand visibility.”

Azure remains a key upside driver. Thill describes Azure demand as “supply-constrained, not demand-constrained,” with Microsoft planning to double its data-center footprint over the next two years.

The company has beaten its Azure revenue guidance for three consecutive quarters, and Thill believes execution on new capacity alone “could likely drive upside to both F2Q… and FY26 Azure consensus”

The analyst also highlighted accelerating AI monetization through Copilot and other first-party offerings. With Azure accounting for “30% of overall revenue,” sustained outperformance could lift overall revenue growth into the “high teens,” he said.

While he acknowledges ongoing capacity constraints and elevated capital spending, Thill believes Microsoft is positioned to deliver “meaningful upside to both top and bottom line” through fiscal 2026.

Earlier in the week, Raymond James upgraded Google owner Alphabet (NASDAQ:GOOGL) to Strong Buy, arguing the company is moving into a phase where its AI stack is “shifting to high gear,” setting the stage for meaningful upward revisions to medium-term estimates.

Analyst Josh Beck said refreshed bottom-up work on Search and Google Cloud Platform (GCP) prompted him to raise 2026 and 2027 forecasts, with his 2027 revenue outlook now above broader Street expectations.

He said Alphabet is likely “entering a cycle of improving AI Stack narrative and upward revisions that could create one of the highest quality top-line AI acceleration stories in the public universe.”

Beck added that for 2026, the AI stack narrative and related estimate revisions should become the dominant performance drivers among mega-cap internet names, rather than a mean-reversion trade.

In Cloud, Beck models GCP revenue growth of 44% in 2026 and 36% in 2027, ahead of consensus. He points to strong contributions from infrastructure and platform services, supported by large-scale deployments of TPUs and GPUs and rising adoption of Gemini API and Vertex AI.

By the end of 2027, he estimates GCP could be generating roughly $25 billion of annualized revenue from TPUs, about $20 billion from GPUs, around $10 billion from Gemini API and roughly $2.5 billion from Vertex AI.

For Search, Beck forecasts revenue growth of 13% in both 2026 and 2027, above Street assumptions, as weakness in core search is offset by scaling adoption of AI Overviews, AI Mode and Gemini. He expects AI-driven queries to support stronger cost-per-click growth as context and conversion improve.

Brokerage firm Stifel initiated coverage of Micron Technology with an Outperform rating, saying the memory cycle is moving into a multi-year upturn supported by structural AI demand and persistently tight supply conditions.

The firm argues Micron is well positioned to benefit from rising average selling prices (ASPs) and a mix shift toward higher-margin products as memory becomes an increasingly critical constraint in AI systems.

“Access to memory has become a key bottleneck in AI racks/systems, increasing demand for more performant, higher bandwidth memory (HBM) solutions,” Stifel analysts said.

With supply expected to remain constrained into 2027, the broker sees a backdrop that supports sustained pricing strength and margin expansion. Against that backdrop, Stifel expects Micron to capitalize on “significant ASP growth and higher margin products,” forecasting non-GAAP EPS growth of more than 275% over the next two years.

HBM is seen as central to Micron’s growth outlook. Stifel said HBM has moved into sharper focus as AI models grow more complex and require faster access to larger data sets. As next-generation chips integrate more HBM, memory is becoming a larger component of total AI infrastructure spending.

As the number two player, Micron is expected to see HBM revenue rise 164% in fiscal 2026 and a further 40% in fiscal 2027, with DDR and QLC NAND also benefiting from AI-related demand, the firm noted.

At the same time, Stifel flags several risks, including the potential return of Samsung as a more meaningful HBM competitor, heavy capital spending that could shift value toward equipment suppliers, a possible easing in DRAM supply-demand dynamics, and the risk that chipmakers design their own base logic dies.

On valuation, Stifel said Micron trades at about 9.7 times calendar 2026 earnings, modestly below historical averages.

“While valuation increasingly embeds significant growth expectations, we believe shares can continue to work on the back of a multiyear, AI-driven product cycle characterized by tight supply,” the firm wrote.

Mizuho analyst Vijay Rakesh believes investors should use the recent pullback in Arm Holdings shares to build positions, arguing the market has become too negative on handset demand.

Arm has fallen about 30% since November, even as the Philadelphia Semiconductor Index has gained roughly 10%. Rakesh said the concerns behind the move are “overdone,” adding that Mizuho would “be buyers of ARM on the ~30% pullback.”

The analyst said that Arm’s growth drivers extend well beyond smartphones. While royalty revenue is roughly 50% tied to mobile, he said it has “always outgrown handset” trends and is expected to grow between 7% and 31% annually from 2021 through 2027.

A key catalyst is the ongoing shift toward Arm’s v9 architecture, which carries “2x ASP/core at v9 vs. v8,” providing a structural uplift to royalties. Rakesh also pointed to rising interest in custom silicon, saying potential ASIC and CPU ramps in 2027 and 2028 could add “$1B+ top-line upside.”

The analyst pointed out opportunities tied to AI-focused custom chips, including a possible training and inference ASIC linked to OpenAI and SoftBank. That project alone, he wrote, “could conservatively drive ~$1B…into C27-28E.”

Beyond mobile, Arm is gaining traction in data centers as hyperscalers increasingly adopt its designs. Rakesh cited platforms such as AWS Graviton, Microsoft Cobalt, Meta’s planned CPU and Nvidia’s Grace and Vera as drivers of a “growing CSS customer base” and an improving royalty mix.

The analyst reiterated an Outperform rating and $190 price target, saying Arm remains “well positioned as the broadest global semiconductor platform.”

Meanwhile, Morgan Stanley upgraded the European semiconductor sector to Overweight this week. The Wall Street firm’s strategists believe the space offers an attractive setup for selective stock picking as diversification inflows build, valuation dynamics improve and semiconductor equipment names emerge as key beneficiaries of the next phase of the AI capex cycle.

The strategists said European equities are seeing rising diversification inflows while beginning to break out of a long-standing valuation discount versus the U.S. Within that backdrop, semiconductors stand out as a sector where bottom-up fundamentals are increasingly driving top-down performance.

Morgan Stanley said its preferred way to express this view remains analyst-led stock selection rather than broad factor exposure.

“While European equities already feel highly idiosyncratic, we see plenty more room for Europe’s stock-level dispersion to rise towards cycle highs,” the strategists wrote.

The upgrade is anchored in the semiconductor equipment segment. Morgan Stanley said ASML has been the dominant contributor to European Top Picks performance year to date, accounting for more than half of weighted gains. ASML also represents around 80% of the MSCI Europe Semis and Semicap sector.

Looking ahead, the bank said the key risk in the AI cycle is shifting away from demand and toward execution and transition. “For 2026, the risk in the AI capex cycle is execution & transition, not demand,” the strategists said, arguing this shift favors European semicap exposure, particularly companies linked to extreme ultraviolet lithography.

Morgan Stanley expects order intake in coming quarters to confirm higher foundry and memory capital spending into 2027, alongside better-than-feared demand from China.

From a strategy perspective, the strategists said they adjusted their sector model to reflect stronger earnings and price target revision breadth for European semiconductors, while neutralising factors such as accruals and reducing China exposure. These changes lifted the sector to second place in its internal rankings, just behind banks.

At the stock level, ASML and ASM International remain Morgan Stanley’s Top Picks, while BE Semiconductor Industries is also highlighted as an Overweight-rated beneficiary of the same themes.

Related articles

5 big analyst AI moves: Buy Microsoft, Arm weakness; Google lifted to Strong Buy

Street Calls of the Week

Analysts consider potential Qiagen deal amid reported strategic review