Microsoft (MSFT)
KeyBanc Capital Markets upgraded Microsoft to Overweight with a $630 price target, reversing a previous downgrade. The primary reason for the upgrade is the significant and accelerating growth of Microsoft’s Azure cloud platform, which KeyBanc states “solves all problems.”
Azure Growth: Azure’s growth accelerated from 31% to 39% in constant currency over the last two quarters.
Earnings Beat: The upgrade followed an earnings report where Microsoft surpassed expectations with an EPS of $3.65 and revenue of $76.4 billion.
Other Factors: KeyBanc also praised Microsoft’s cost controls, including over 10,000 layoffs, and noted a lack of concern over macroeconomic headwinds.
Tesla (TSLA)
According to Wolfe Research, Tesla’s stock is now trading more on its AI and autonomy “narrative” than its near-term financial performance.
AI Catalysts: Key drivers for the stock include potential Full Self-Driving (FSD) approvals in China and Europe, robotaxi developments, and the Optimus humanoid robot.
Auto Business Concerns: The firm cut its 2025 and 2026 EPS estimates, citing a challenging outlook for the core auto business, especially with the potential expiration of U.S. EV tax credits.
Energy Division Strength: Tesla’s Energy division is a bright spot, with revenues expected to double to around $18 billion by 2026. This success is considered critical to offset rising AI investment costs.
Semiconductor Sector & AI Bubble Concerns
Morgan Stanley (Bullish): The firm raised its price targets on several chip stocks due to “exceptional” demand for AI chips.
Nvidia (NVDA): Remains the top pick, with a price target increase to $200.
Broadcom (AVGO): Target raised to $338.
AMD: Target raised to $185.
Other increases: Marvell Technology (
80)andAsteraLabs(125).
Sevens Report (Cautious): The firm warned of a potential “AI bubble,” pointing to a disconnect between AI stocks and the broader market.
Recommendation: Investors should watch the broader Philadelphia Semiconductor Index (SOX) rather than just Nvidia, as it provides a more reliable market signal.
Warning Sign: The SOX index has failed to reach a new high despite recent gains, suggesting the rally may be unsustainable.
Samsung vs. Intel
Bernstein positions Samsung as the best alternative to Taiwan Semiconductor Manufacturing (TSMC), ahead of Intel.
Key Catalyst: A reported $16.5 billion chip partnership with Tesla is seen as a major turning point for Samsung’s foundry business.
Samsung’s Advantages: Bernstein believes Samsung is better positioned due to its comparable technology, better cost structure, and the financial ability to sustain investment, supported by its memory business.
Market Impact: The Tesla deal is expected to have a minimal impact on TSMC and only a low-single-digit percentage impact on overall demand for wafer fab equipment.
