5 big analyst AI moves: Apple downgraded, Nvidia gets a Sell rating, TSMC top pick

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

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Rosenblatt downgrades Apple due to a lack of AI-driven iPhone sales acceleration

Rosenblatt Securities downgraded Apple (NASDAQ:AAPL) to Neutral from Buy and lowered its price target to $217 from $263 due to a lack of an AI-driven jump in iPhone sales.

“The F2Q25 quarter just reported highlights a company with amazing supply chain skill, and better demand for iPhones than many had feared. Still, for this stock to really work there needs to be an AI driven sharp acceleration in iPhone sales,” analyst Barton Crockett wrote.

“And as time has gone on the argument for that seems to be fading,” he added.

Apple reported fiscal second-quarter revenue of $95.4 billion, up 5.1% year-over-year and 7.6% in constant currency, in line with pre-trade war estimates and at the top end of company guidance. iPhone sales rose 2%, exceeding Rosenblatt’s forecast by 200 basis points, while services revenue climbed 12%—14% in constant currency.

For the June quarter, Apple guided for low to mid-single-digit revenue growth and a gross margin range of 45.5% to 46.5%.

Rosenblatt noted Apple’s ongoing production shift, with most iPhone assembly for the U.S. market moving to India and nearly all iPad, Mac, Watch, and AirPods manufacturing transitioning to Vietnam. China remains the base for production targeting other regions.

The downgrade reflects Rosenblatt’s decision to remove the previously assumed AI-driven replacement super cycle from its forecasts. The new $217 target is based on a 27x multiple of projected 2026 earnings, with a roughly 10% compound annual growth rate.

Nvidia stock receives a rare Sell rating on Wall Street

Earlier this week, Seaport Research Partners initiated coverage on Nvidia (NASDAQ:NVDA) with a rare Sell rating and a $100 price target, citing stretched valuation and growing risks tied to AI momentum and customer behavior.

“Nvidia is one of the leading beneficiaries of the current AI spending boom, but its prospects are well understood and largely priced into the stock,” the brokerage wrote, suggesting limited upside from current levels.

Despite strong demand for its next-gen Blackwell chips—already sold out for the year—Seaport sees downside risks mounting. The firm pointed to deployment challenges around Nvidia’s systems, including issues with “cooling, configuration, and orchestration,” and warned of a “murky” return on AI investments.

“Our research indicates significant complexity required for deployments of Nvidia systems,” analysts said. They added that enterprise customers are still “searching for use cases and ways to generate returns from significant AI investments to date.”

Seaport also flagged increasing competition from Nvidia’s own customer base. “Strong momentum behind hyperscalers’ internal Nvidia alternatives – Nvidia’s largest customers are all looking to design their own chips,” the note stated.

While the brokerage doesn’t call AI a bubble, it expects headwinds to emerge. “Likely to see slowing of AI budgets in 2026,” Seaport said, noting that even if “AI may do well this year, NVDA is likely to underperform relative to peers.”

Morgan Stanley (NYSE:MS) reinstates TSMC as top pick

Morgan Stanley has reinstated Taiwan Semiconductor Manufacturing (NYSE:TSM) as a top pick, pointing to a rebound in confidence driven by accelerating AI capital expenditures and reduced concerns around key overhangs.

“With the robust AI capex guidance from Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT), we move TSMC back to our Top Pick,” analysts wrote.

The bank had previously held off due to three main risks: AI demand uncertainty, a potential joint venture with Intel (NASDAQ:INTC), and looming tariff decisions. Those concerns now appear to be easing.

“Our latest supply chain checks suggest that CoWoS-L demand at TSMC is unchanged,” the analysts said, pushing back on investor fears about softening demand for the chipmaker’s advanced packaging technology.

Meta’s decision to lift its 2025 capex outlook by $7 billion and Microsoft’s move toward “shorter duration server kit” spending were also viewed as positive signals.

Meanwhile, Intel’s impact looks more limited. “TSMC’s N2 should be used to produce both CPU and GPU tiles, but it will be shared with Intel 18A,” the note said, adding that “TSMC management ruled out the JV possibility.”

On tariffs, uncertainty remains ahead of the May 7 decision, though no new risks have emerged, according to Morgan Stanley.

“TSMC is the more attractive OW [overweight]” stock, Morgan Stanley’s team wrote, highlighting its 2025 price-to-earnings (P/E) estimate of 15.5x. “We have expected a quick rebound in the stock once these overhangs are removed,” the analysts added.

JPMorgan (NYSE:JPM) lifts Western Digital to Overweight

Meanwhile, JPMorgan upgraded Western Digital (NASDAQ:WDC) shares to Overweight from Not Rated and assigned a December 2025 price target of $57, citing strong earnings, resilient AI-driven demand, and improving visibility from long-term agreements.

“Following the successful business separation of the NAND flash business in February, WDC is now a pure-play HDD provider,” analysts wrote, pointing out the company’s sharpened focus on advanced hard drive solutions for cloud and data center markets.

March-quarter results topped expectations, and Western Digital guided June-quarter revenue to $2.45 billion, ahead of the $2.36 billion consensus. The bank attributed the strength to sustained demand from hyperscale and cloud customers.

JPMorgan also pointed to “LTAs from its large hyperscaler customers extending through 1H of CY26,” which are helping to secure revenue visibility.

The company continues to ramp high-capacity HDDs, shipping over 800,000 units of its 26TB and 32TB drives in the March quarter, and is on track to exceed 1 million in the June quarter—“one quarter ahead of plan.”

Progress is also being made on the next generation of HAMR drives, expected to reach volume production in the first half of 2027.

Gross margin guidance of 40.5% for the June quarter reflects “strong pricing power and tight supply environment,” and JPMorgan sees room for further margin expansion as cloud demand grows.

Western Digital also took steps to bolster its balance sheet, including the redemption of $1.8 billion in 2026 senior notes and the launch of a quarterly dividend of $0.10.

Truist Securities ups ServiceNow to Buy on leading AI positioning

ServiceNow (NYSE:NOW) also received an upgrade to Buy from Hold at Truist Securities, which also raised its price target on the stock to $1,200 from $950.

The revision comes due to the company’s growing role in consolidating enterprise IT and strong positioning in AI. The new target implies over 25% upside from the prior close.

Truist’s analysts see ServiceNow as a key beneficiary of macro uncertainty and AI adoption, noting its ability to deliver “compounding gains across all operating segments” through its platform architecture.

“Additionally, as new technologies come to market, incumbent vendors typically receive preference from IT buyers,” analysts led by Joel P. Fishbein Jr. wrote.

They highlighted ServiceNow’s expansion into established areas like CRM and emerging ones such as agentic AI as drivers of durable growth. “We see their go-to-market (GTM) execution track record as the gold standard in our coverage,” they added.

Truist emphasized the company’s leadership in AI, pointing to industry feedback that suggests growing demand for pre-built tools over custom solutions. ServiceNow’s traction with its Pro Plus SKU is seen as an early sign of that momentum.

The analysts also noted ServiceNow’s strategic importance within IT organizations and increasing relevance for knowledge workers as factors supporting its AI buildout.

In the federal segment, Truist estimates the business accounts for about 9% of annual contract value.

While acknowledging the stock’s premium valuation—trading at 15x FY25 revenue—the brokerage views it as warranted.

ServiceNow is seen as a “generational compounder” with projected high-teens top-line growth over the next five years, justifying its continued outperformance relative to other infrastructure software peers.

This article first appeared in Investing.com