The big story on Wall Street has been stocks retreating as bond yields rise. The Dow Jones Industrial Average now sits flat for the year while 10-year Treasuries have seen their yields rise from 3.79% in late December to 4.66% today.
Given the recent downturn in stocks, you’d figure that some of the “hottest” areas in the market like artificial intelligence stocks would have seen big declines. Yet, AI stocks that have seen significant gains across the past year have proven surprisingly resilient.
Today there were several upgrades and Wall Street research houses initiating coverage across the AI space. Let’s check in on some of the most notable calls.
Super Micro Computer Gets a $1,500 Price Target
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Super Micro Computer (Nasdaq: SMCI) is one of the most popular names in the AI space. The company was an early leader in selling AI servers and saw revenue surge by 103% last quarter (from 14.4% the quarter before).
Super Micro Computer has become somewhat of a battleground stock thanks to these booming sales. On one side bears argue that few competitive advantages exist versus rivals like Dell and Hewlett-Packard. On the other, bulls believe the company’s early push into AI servers gives the company underappreciated advantages that can lead to years of strong growth.
Loop Capital threw its hat into the “bull” side of the argument today, raising its price target on Super Micro to $1,500 per share. The researcher notes Super Micro’s leadership in a space with a need for “complexity and scale.”
A $1,500 price target would put Super Micro at 25X to 30X its fiscal 2026 earnings estimates. Loop also projects revenue in fiscal 2026 at $30 billion to $40 billion, which is significant growth from last quarter’s run rate of $14.6 billion.
Current Wall Street estimates project fiscal 2026 revenues at $22.9 billion, so Loop is calling for a much more bullish forecast than most analysts.
Evercore Initiates Semiconductor Coverage and Rates NVIDIA a Buy
Evercore initiated coverage of semiconductors on Tuesday. Their biggest macro call was for industry growth to peak in the first quarter of 2025. That puts risk on companies in the “compute” side of AI (NVIDIA, Broadcom, AMD, Marvell) seeing a downturn around the third quarter of this year.
And yet, the researcher put a price target of $1,160 on NVIDIA (Nasdaq: NVDA). While Evercore sees some choppiness in the overall semiconductor space ahead, they highlight the “moat” NVIDIA is creating from its software and networking offerings, making it more vertically integrated than competitors. In fact, Evercore highlights the potential for NVIDIA to be the biggest vertically integrated winner of the next computing era that could last the next 15 to 20 years.
ARM Holdings Gets a $150 Price Target
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Another positive piece of Wall Street research in the AI space came from Bank of America, which raised its price target on Arm Holdings (Nasdaq: ARM) to $150 per share.
ARM saw its share price more than double in the days following its last earnings report. It retreated from its highs as investors weighed near-term AI catalysts against most of ARM’s revenue coming from older IP.
Yet, Bank of America is bullish on ARM’s prospects and the potential for AI and cloud computing to be more of a near-term catalyst than investors expect. ARM is richly priced. Its market capitalization stands at about $125 billion while 2024 revenue estimates are just $3.2 billion.
Working in ARM’s favor is the company’s significant profit margins. 39% of sales flow to ARM’s bottom line, which means if sales accelerate it could potentially see something like $4 billion in profits on sales of $10 billion by the end of the decade.
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