By Louis Juricic and Sarina Isaacs
Investing.com — Here’s your weekly Pro Recap on this week’s top tech stocks: Potential new US regulations on artificial intelligence; concerns about Micron; a continuous string of downgrades by Tesla after a scorching run; Apple closes above $3 trillion.
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US government mulling new AI regulations: report
Stocks of AI chips Nvidia (NASDAQ:) and Advanced Micro Devices (NASDAQ:) lost ground Wednesday after a Wall Street Journal report said the Biden administration is contemplating imposing new chip export restrictions of artificial intelligence (AI) in China.
The move stems from growing apprehensions surrounding the potential dominance of this technology by US adversaries.
A move could be taken by the Commerce Department to halt shipments of AI chips made by Nvidia and other chipmakers to customers in China as early as July, the report added. The ban would include selling Nvidia’s A800 chips without a license.
Despite the latest news, Citi analysts believe demand for AI will outstrip supply this year and Nvidia can move its chips. They maintain a Buy rating on the stock.
For the week, Nvidia slipped slightly to $423.02, while AMD gained 2.4% to $113.91.
Micron beats, but investors still worried about China risk
Micron’s (NASDAQ:) balance sheet came in better than expected, but risk concerns regarding China’s market share remained.
The shares lost 4% on Thursday and continued to slide into Friday’s close.
The chipmaker said the fund was for memory chip revenue, announcing an adjusted loss of $1.43 per share on revenue of $3.75 billion. Analysts polled by Investing.com forecast a loss of $1.59 per share on revenue of $3.67 billion.
However, the chipmaker warned that the recent decision by the China Cyberspace Administration of China was a “significant headwind” affecting its outlook and slowing its recovery.
However, Wall Street analysts have mostly reflected positively on Micron’s results and prospects. Citi said that while the results were “ugly,” as expected, there are many signs that recovery is on the way.
“We continue to believe that the worst of the memory cycle is behind us and that a recovery is in sight,” they said in a statement.
And Piper Sandler analysts upgraded the rating to Neutral with a price target of $70 per share “based primarily on improving end-market inventory condition with potential for improved volumes and pricing in 2H23.”
Several analysts have reduced Tesla to neutral
After the dizzying run of Tesla (NASDAQ: ) stock last month, the stock has been hit by a series of rating-based downgrades over the past two weeks, including cuts to the neutral equivalent ratings of Goldman Sachs, Morgan Stanley and Barclays.
Since its low in late April, Tesla shares are up about 70% compared with an 8% increase for the .
Goldman has cut shares to Neutral since the purchase, though analysts still raised the price target to $248 per share from the previous $185, reflecting higher EPS estimates and a higher target multiple. He elaborated:
Overall, we believe Tesla is well positioned for long-term growth given its leading position in the electric vehicle and clean energy markets (which we attribute in part to its ability to offer complete solutions including charging, storage, software/FSD and services with a direct sales model), is now better reflected in inventory.
While the downgrade move was primarily driven by valuation, Goldman also highlighted a “challenging pricing environment for new vehicles,” which it believes will hurt Tesla’s non-GAAP gross margin in 2023.
Overall, Goldman remains “positive on EV adoption and we continue to see the greatest investment opportunities among our broader group of suppliers, especially those with higher content to enable the transition to EVs and electrification.” .
Barclays, for its part, downgraded the stock to Equal Weight from Overweight, saying it believes the shares’ recent sharp rise is ignoring questions about near-term fundamentals.
While Tesla stock movements tend to be driven by more than fundamentals at times, analysts at Barclays say they are cautious about jumping on the bandwagon. They believe the rally is primarily driven by renewed investor love for tech stocks, as well as excitement over recent announcements that Tesla will open up its Supercharger network to other brands:
Relative disregard for near-term TSLA fundamental challenges amid the strong rally is our main concern for the stock and at the heart of our downgrade to an EW rating. We see a number of underlying weaknesses in the near-term TSLA narrative.
He added, however, that he remains bullish for the long term:
To be clear, we see significant long-term opportunity for TSLA, a view that has supported our previous assessment of being overweight. We continue to see TSLA as the long-term winner among OEMs in the race towards an EV world, with a strong “balance between the two clocks.”
All this adds up to the fact that the market sees Elon Musk’s company as “more than a car company”. However, analysts believe the market is ignoring near-term fundamental challenges.
And Morgan Stanley cut Tesla shares to Equalweight from Overweight with a price target of $250, down from $200, noting the “relatively comprehensive valuation and more balanced risk reward and highlighting key drivers and investor debates for the title at this level”.
Tesla shares are up 122.8% year-to-date.
Apple closes above $3 trillion for the first time
Apple (NASDAQ: ) shares closed above a market cap of $3 trillion on Friday, the first time any company has done so.
Apple stock’s latest upward push comes after Citi analysts initiated research coverage with a Buy rating and a $240-per-share price target. They see further upside potential in Apple stock despite a roughly 47% year-to-date rally.
“Apple is addressing the macro slowdown and inflationary pressure on consumer spending by steadily gaining share from Android phones, we see about 30% more upside potential than current levels,” analysts said in a client note.
They also argue that the market is underestimating continued gross margin expansion. This factor is one of the key pillars of analysts’ bullish position on Apple, in addition to the growing services sales mix and strong balance sheet.
Apple shares briefly traded above the $3 billion mark in early 2022, but failed to close above it.
Senad Karaahmetovic and Yasin Ebrahim contributed to this report.
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