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Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Phillip Capital cuts Microsoft (NASDAQ:MSFT) rating on valuation concerns
At the start of this week, Phillip Capital downgraded Microsoft to Accumulate from Buy, citing valuation concerns despite solid third-quarter results that met expectations.
“3Q25 revenue/PATMI met our expectations at 74%/74% of our full-year 2025 (FY25) forecasts,” analysts wrote, pointing to a 13% year-over-year revenue increase, fueled by strong demand for Azure and cloud services.
Looking ahead, Microsoft expects fourth-quarter revenue to grow 14% to $73.7 billion. Azure is projected to rise 34.5% year-over-year, while Office 365 commercial cloud revenue is seen increasing 14%.
Phillip Capital kept its FY25 forecasts and DCF-based target price of $480 unchanged, noting Microsoft is “well-positioned to benefit from the rising demand for large AI models,” particularly through Azure and its Copilot tools.
The downgrade, the broker noted, is based on valuation rather than operational performance. Analysts also highlighted Microsoft’s continued resilience amid tariff concerns and its entrenched enterprise customer base.
Jefferies: Recent Google stock sell-off overdone, valuation compelling
Shares in Google (NASDAQ:GOOGL) owner Alphabet came under pressure earlier this week, tumbling over 7% on Wednesday after Apple’s Eddy Cue testified in the Department of Justice’s antitrust case, stating that Safari’s search volume fell in April for the first time in more than 20 years.
Cue also suggested that AI-driven platforms like Perplexity, OpenAI, and Anthropic could emerge as credible alternatives to traditional search engines. The comments triggered a $155 billion decline in Alphabet’s market capitalization.
Despite the reaction, Jefferies analysts called the sell-off an “overreaction.”
“We believe GOOGL -7% reaction to Apple (NASDAQ:AAPL) exec’s comments at antitrust trial is overdone,” analysts led by Brent Thill wrote. They argued that Google’s AI adoption and diversified search ecosystem are being underappreciated.
The note pointed to rapid traction for AI Overviews, now exceeding 1.5 billion monthly active users, with monetization on par with traditional search and room for growth. Analysts also emphasized that Safari comprises just a fraction of the search market—Chrome leads with 66% global browser share versus Safari’s 17%, and iOS represents only 18% of operating systems.
Google’s iOS app continues to expand, with daily active users rising 15% year-over-year in April, "showing growth in users who go directly to Google for searches,” Jefferies noted.
The brokerage also suggested Apple’s remarks may be strategic, helping frame Google as non-monopolistic: “Considering Google’s substantial payment to Apple to be its default search provider, it is logical that Apple might highlight data points supporting the narrative that Google is not anti-competitive in search.”
Jefferies highlighted continued strength in Google’s core search business, with Q1 revenue up 10% year-over-year. AI Overviews and visual search via Lens are gaining momentum, while Google maintains dominant global search engine share—around 90% overall, 94% on mobile, and 79% on desktop, according to StatCounter.
Valuation also looks compelling. Alphabet trades at 9.7x next-twelve-month EV/EBITDA, near its 10-year low and below its historical average of 12x, analysts noted.
Time to revisit the AI trade, Wells Fargo’s Harvey says
After a broad pullback in AI stocks this year, Wells Fargo’s Christopher Harvey believes it may be an opportune moment to revisit the trade. In a note titled “Time to Revisit the AI Trade,” Harvey argued that “the YTD drawdown has uncovered value for AI Picks & Shovels,” referring to infrastructure and service providers supporting the AI ecosystem.
“The group’s risk/reward today is much more attractive than a year ago,” he wrote, comparing the current setup to the 2022 rebound in communication services stocks. Despite recent volatility, Harvey maintained that “we remain in a durable AI investment supercycle,” citing ongoing demand strength from names like Microsoft and Meta (NASDAQ:META).
Harvey emphasized that the current cycle differs from past tech bubbles. “It’s not your father’s tech cycle,” he noted, describing today’s AI capex as being led by “profitable firms with strong balance sheets” rather than speculative players. He highlighted a “symbiotic iterative cycle” between AI infrastructure and applications, supported by strategic relevance and faster product development.
AI-linked companies may also prove more resilient to macro pressures. “Datacenter construction associated with hyperscaler cap-ex has multi-year lead times,” Harvey wrote, suggesting these firms are “less exposed to potential recession.” As productivity improves, capital investment is expected to displace some operating costs.
On trade concerns, Harvey downplayed the impact of tariffs, noting “GPUs and finished servers are USMCA-compliant goods.” With Mexico already supplying two-thirds of U.S. server imports, there is additional room for expansion.
Following a nearly 29% drop from recent peaks, many AI stocks now trade at more reasonable valuations, while still offering “premium growth expectations.”
To capture the trend, Wells Fargo (NYSE:WFC) introduced a 25-stock “AI Picks & Shovels” portfolio, featuring Nvidia, Broadcom Inc (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing (NYSE:TSM), AMD, GE Vernova (NYSE:GEV), Marvell Technology, and Dell Technologies (NYSE:DELL).
BofA upgrades AMD stock to Buy on multiple growth cylinders
Meanwhile, Advanced Micro Devices Inc (NASDAQ:AMD) received an upgrade at Bank of America (NYSE:BAC) to Buy from Neutral, with the bank citing a favorable risk-reward setup and the potential for more than 20% revenue growth over the next two years.
The Wall Street giant also lifted its price target to $120 from $105, reflecting higher earnings forecasts and increased confidence in AMD’s product roadmap.
The upgrade follows AMD’s better-than-expected Q1 results and a strong Q2 revenue outlook of $7.4 billion—10% above BofA’s forecast despite a $700 million drag from China. Analysts said the print “address our pre-call concerns” around AI export restrictions and GPU competition from Nvidia (NASDAQ:NVDA).
“We find risk-reward compelling and upgrade AMD to Buy,” BofA analysts wrote, pointing to five drivers: “1) potential to deliver 20%+ topline growth in CY25E and CY26E, despite China headwinds, 2) continued share gains in PC/server CPU against INTC, 3) meetable/beatable targets for AI GPU sales… 4) EBIT margin upside towards 30% in CY27E vs 22% in CY25E, and 5) compelling valuation at 18x CY26E PE.”
BofA lifted its 2025–2027 earnings outlook by as much as 11%, expecting stronger margins from a better product mix. Analysts now project AMD’s PC CPU average selling price to exceed Intel’s ($143 vs. $133) for just the second time ever and expect its PC market value share to climb to 24.5% next year.
In GPUs, the upcoming launch of AMD’s MI350 chips in the second half of 2025 could drive upside to the firm’s $6.2 billion sales forecast, BofA’s team said.
Marvell Technology downgraded at Cantor on lack of catalysts
Brokerage Cantor Fitzgerald downgraded Marvell Technology (NASDAQ:MRVL) to Neutral from Overweight earlier this week amid mounting concerns over its custom silicon business and the loss of key clients.
The firm also slashed its price target to $60 from $125, warning of potential revenue declines in 2027 that could weigh on long-term earnings prospects.
“While we believe the meaningful sell-off of MRVL shares since peaking in January reflects loss of Trainium Gen3 AMZN, we do not believe it reflects loss of MSFT Maia Gen3 — which we are hearing will happen from our industry checks,” analysts wrote.
According to the note, Amazon (NASDAQ:AMZN) is shifting part of its next-gen Trainium chip supply to Alchip, while Microsoft is expected to move its Gen3 Maia chips—codenamed Griffin—to Broadcom starting in 2027. “All of which points to a much less sticky business than we had originally thought,” Cantor analysts added.
While Marvell could still see “solid to strong custom silicon revenue growth in CY25/26,” the broker now expects earnings to drop to around $3.00 in 2027—well below earlier projections. “It’s hard to see MRVL catching a multiple until we have more clarity on other wins,” the note said.
Further dampening sentiment, Cantor highlighted that Marvell has postponed its June 10 Investor Day to 2026 and will instead hold a more limited webinar focused on custom silicon. The delay, according to analysts, signals that “potential catalysts will be few and far between over the near- to medium-term.”
