Investing.com — Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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BofA cuts Tesla rating on high execution risks
Earlier this week, Bank of America (NYSE:) downgraded Tesla (NASDAQ:) to Neutral from Buy, while raising the price target to $490 from $400.
Analysts flagged high execution risks as the key reason behind the downgrade, noting that the current valuation already reflects much of Tesla’s long-term potential across core autos, robotaxis, Optimus, and energy businesses.
BofA analysts, led by John Murphy, see Tesla’s robotaxi service as its largest opportunity, accounting for roughly 50% of its valuation. The service, expected to launch in 2025, could be worth $420 billion in the US and over $800 billion globally.
Initially, Tesla is expected to own and operate the fleet, with third-party providers joining later. While the rollout may start slowly with high per-mile costs, Tesla’s lack of drivers offers a significant cost advantage over competitors like Uber (NYSE:) and Lyft (NASDAQ:).
Tesla’s Full Self-Driving (FSD) technology also holds substantial value, estimated at $480 billion.
BofA projects that 23 million vehicles could feature FSD by 2030, growing to 75 million by 2040, generating significant EBIT with higher margins than its core automotive segment. Analysts note this valuation doesn’t yet include potential licensing opportunities with other automakers.
Potential upcoming catalysts for Tesla include a low-cost model launch in early 2025, a new model later that year, the robotaxi rollout by mid-2025, and Megapack production scaling in Shanghai in Q1 2025.
Additional drivers include updates on FSD subscriptions, progress on the Optimus humanoid robot targeting 1,000 units by year-end 2025, and potential risks from unfavorable policy changes.
AMD downgraded at HSBC, price target slashed
HSBC analysts downgraded Advanced Micro Devices (NASDAQ:) stock to Reduce from Buy on Wednesday and slashed their price target to $110 from $200, citing concerns about AMD’s AI GPU roadmap, which the analysts view as less competitive.
The analysts cited challenges in AMD’s ability to gain traction in the AI GPU market, pointing to tepid demand for the company’s MI325 GPU and possible delays in delivering a product to rival Nvidia (NASDAQ:)’s NVL rack platform.
For that reason, HSBC has lowered its projection for AMD’s AI GPU revenue in fiscal 2025 (FY25) to $8.1 billion, down from $12.3 billion, falling well below the consensus estimate of $9.5 billion.
“AMD’s share price has corrected by 24% in the past three months but we believe there remains further downside,” HSBC analyst Frank Lee wrote in a note. “We believe AMD wouldn’t be able to penetrate the AI GPU market as much as we had earlier anticipated.”
HSBC expects AMD to launch its MI350 chip in the latter half of 2025, in line with its schedule. However, the analysts do not foresee the introduction of an AI rack solution capable of competing with Nvidia’s NVL rack platform until late 2025 or early 2026, aligning with the planned launch of AMD’s MI400 chip.
The downgrade also reflects concerns over AMD’s slowing momentum in its client business and limited growth potential for non-AI data center revenue in FY25.
Salesforce Top Pick for 2025 at Needham
Needham & Company has named Salesforce Inc (NYSE:) its top pick for 2025 in the Enterprise Software (ETR:) sector, adding the stock to its Conviction List.
In a Wednesday note, the firm raised Salesforce’s price target from $375 to $400, driven by optimism around the company’s Agentforce (AF) strategy.
“CRM is our 2025 top pick in our Enterprise Software universe,” Needham stated, emphasizing confidence in Salesforce’s ability to execute and monetize its new initiative. The firm highlighted that Agentforce is now a significant component of nearly half of enterprise customer deals, signaling its growing importance within the Salesforce ecosystem.
“AF is an active component in nearly half of enterprise customer-sized deals,” the analysts said. While initial deal sizes remain small, Needham expects a substantial ramp-up in the second half of the year if pilot programs prove successful.
AI plays a central role in Salesforce’s strategy, with rapid hiring of AI-focused sales representatives expected to drive stronger second-half bookings. “AI-focused sales rep hiring is moving fast, which should aid 2H bookings,” Needham continued.
The firm also pointed to the “halo effect” of Agentforce, which is becoming increasingly evident. Products like Mulesoft are expected to benefit significantly from the broader adoption of Agentforce.
“Halo effect is becoming real, Mulesoft likely benefits more than other CRM products,” the note added.
From a valuation standpoint, Needham views Salesforce as attractive, trading at 24x FY26 free cash flow estimates. The firm forecasts 20% FCF growth in FY26, supporting its bullish outlook for the stock.
2025 is key AI adoption inflection year: Evercore ISI
Evercore ISI sees 2025 as the pivotal year for widespread AI adoption, despite enthusiasm for the burgeoning technology already surging across industries.
While corporate earnings calls increasingly reference AI, capital spending by hyper-scalers remains strong, and interest in AI technologies, as measured by Google (NASDAQ:) searches, has reached record levels, actual implementation has lagged.
“With consumers enthusiastic on AI adoption yet sentiment in Corporate America relatively muted, 2025 is the critical AI adoption inflection year,” Evercore strategists led by Julian Emanuel wrote in a Sunday note.
AI capabilities have advanced significantly, moving beyond chatbots to automating complex physical and digital tasks. In 2024, generative AI spurred progress in robotics, autonomous digital agents, and manufacturing tools.
These advancements, rooted in improvements in Inference Time Reasoning, communication, and training data, enable AI systems to “think” before acting, marking a key shift in functionality.
While AI-driven innovation continues, investor sentiment turned cautious in mid-2024, leading to the first significant pullback in AI-exposed stocks since ChatGPT’s launch.
The firm believes AI will fundamentally reshape skilled work, addressing labor shortages.
Evercore identifies key players in the AI ecosystem as “Enablers, Adopters, and Adaptors,” emphasizing their importance in portfolio strategies for 2025. These companies are expected to play a central role in driving corporate adoption as businesses increasingly view AI as essential to staying competitive.
“We believe 2025 will draw in more participants to the “AI Revolution” as the advances in the technology and its application make AI a “must have” for companies’ ability to compete effectively in the years ahead,” Emanuel and his team wrote.
The analysts maintain their confidence in AI’s transformative impact, projecting the S&P 500 to hit 6,800 by year-end.
Deutsche Bank downgrades Adobe stock on AI monetization concerns
Also this week, Deutsche Bank downgraded Adobe (NASDAQ:) to Hold from Buy, citing a lack of clear financial benefits from its generative AI text-to-image technology.
Analysts, led by Brad Zelnick, expect Adobe’s stock to remain “range-bound” until the company demonstrates more tangible progress in monetizing its AI capabilities.
The downgrade follows a slowdown in Adobe’s annual net new annual recurring revenue, which decelerated for the third consecutive year. Wall Street projections suggest this trend could continue in the current fiscal year.
While the analysts believe Adobe will ultimately succeed in monetizing generative AI, they note that “it will take some time for this to become obvious in the company’s disclosure and/or financials.”
In December, Adobe issued a full-year revenue forecast of $23.30 billion to $23.55 billion, falling short of the average analyst estimate of $23.78 billion, according to LSEG data. The forecast prompted several brokerages to lower their price targets for the stock, despite Adobe’s management expressing confidence in stronger growth during the second half of the year.
Adobe is heavily investing in AI-driven tools, such as its Firefly offering, to compete with emerging rivals like Stability AI, Midjourney, and OpenAI’s Sora. However, Deutsche Bank (ETR:)’s analysts remain cautious, saying they are “moving to the sidelines” until Adobe’s AI efforts translate into clearer financial performance.
