Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
AI rout is a buying opportunity, Yardeni says
Yardeni Research told investors the selloff in Thursday's session represents a buying opportunity, arguing that political backlash against data centers is a speed bump for the AI boom rather than a roadblock.
"Since September 15, we've counseled proceeding with caution in the stock market through the midterm elections," the firm wrote, adding that it had anticipated buying opportunities after Tuesday's elections. Stocks rallied Wednesday, driven by short covering, but then plunged, with the S&P 500's 4.4% decline its worst day since the April 2025 tariff shock and the Nasdaq's 5.5% drop pushing it into correction territory.
"The cold shower we warned might follow a democratic sweep arrived late," Yardeni said.
On Thursday, investors began "discounting the implications of the Democratic sweep for the economy's golden goose: the AI investment boom." Yardeni pointed to growing backlash against data centers, citing an NBC exit poll showing 76% of voters opposed new facilities in their communities.
"Perhaps most consequentially, Texas, which accounts for nearly 30% of planned US data center additions in 2028, elected Gina Hinojosa as governor after she promised to halt new approvals," Yardeni said. Goldman Sachs estimates that states facing possible restrictions account for around 45% of planned U.S. data center capacity.
Still, Yardeni believes the backlash, alongside financial and physical bottlenecks, are "just speed bumps" and that the selling is overdone. "Data centers will get built, albeit at a slower pace. Speed bumps should prevent the AI boom from moving too fast and crashing around the next curve," it said.
"That's why we view Thursday's sell off as a buying opportunity."
Analysts downgrade Marvell on concerns over all-stock deal with Lumentum
Earlier this week, TD Cowen and Bank of America have both downgraded Marvell Technology, citing concerns about the chipmaker's all-stock acquisition of Lumentum.
TD Cowen cut Marvell to Hold from Buy, slashing its price target to $175 from $350. Analyst Sean O'Loughlin expects the deal to dilute EPS by a mid-single-digit percentage in 2028, its first year, and worries it may come at or near the peak of an optical mini-cycle.
"Our downgrade is driven primarily by our negative view of the transaction itself in terms of structure and timing, rather than the quality of the asset Marvell is acquiring," he wrote.
O'Loughlin said Lumentum is likely to become a "crown jewel" within Marvell's portfolio, but noted that bottom-up consensus implies a roughly $100 billion optical transceiver market in 2027, compared with TD Cowen's $47 billion forecast. If the cycle turns, Lumentum's operating leverage could worsen the dilution.
Bank of America downgraded Marvell to Neutral from Buy and cut its price target to $225 from $400. Analyst Vivek Arya cited a potential extended stock overhang from the deal, along with a big drop in the SOX index over the past month.
Arya said the deal has strategic merit, creating a broader electrical-to-optical connectivity platform, but flagged a lengthy regulatory process with closing expected in the first half of 2028, limited EPS accretion as $1 billion in cost cuts falls short of offsetting about 50% share dilution, and potential customer conflicts.
"There was no mention of any large M&A in MRVL's recent analyst day, so the news comes as a considerable surprise," he said. "We question the impact on LITE's valuation once its laser shortages are inevitably resolved."
Citi says AI trade may stay under pressure post-midterms, prefers Europe over U.S. stocks
Citi told clients the AI trade could remain under pressure after the U.S. midterm elections, and said it prefers European stocks over U.S. equities for now.
The bank noted that markets typically pull back ahead of midterms and rally afterward, with seasonal analysis pointing to November-December S&P 500 returns of 3% to 4%. But this year's pre-election weakness had other causes.
"More importantly, the pullback ahead of the midterms was not mostly due to the election, but due to AI financing worries, and oil," the bank wrote.
Citi still expects data centers to get built given strong demand for computing power, but said their location, design and pace of construction may change after Democrats' gains. "This is far from ideal for the picks and shovels, including semis," the bank said.
Its "Generals" index, which tracks how many of the seven largest S&P 500 stocks trade below their 200-day moving averages, is close to triggering a cautionary signal, and Citi expects more rotation out of tech for now.
Citi said the election has not clearly changed the Iran war's trajectory, but a renewed escalation does not appear imminent, with a third U.S. aircraft carrier not due in the Gulf until mid- to late November.
"We prefer to use Europe, given that the AI story remains difficult, while the large move lower in oil should benefit European equities much more, also because it may lead to a more dovish ECB," Citi said. At the very least, it expects European stocks to outperform the U.S.
Citi cuts Adobe to Sell, sees "rising risk of a hard reset"
In a separate note, Citi has downgraded Adobe to Sell and slashed its price target to $207 from $250, saying it sees downside risk to consensus growth estimates into fiscal 2027 as a leadership transition coincides with mounting competitive and macro pressure on the Creative business.
"[We] see rising risk of a hard reset," Citi analysts said. Incoming CEO Anil Chakravarthy, who takes over Dec. 1, assumes the role "amid key leadership vacancies," including the CFO and the head of Digital Media.
The Wall Street firm expects a weaker fiscal 2027 outlook when Adobe reports fourth-quarter results in early December. "A 'hard reset' would pressure shares near term but provide time to rebuild leadership, refine strategy, and establish a more achievable base to accelerate," the analysts wrote.
The bank expects Adobe to lean more on top-of-funnel growth through AI and Firefly rather than its classic Creative Cloud suite, which has relied on price increases. That shift toward monthly active users will likely weigh on total ARR in fiscal 2027 and 2028, with the greatest impact in core Creative, compounded by weak small-business demand and competition from web-based and AI-native tools.
Citi estimates the user-growth emphasis could add 200 basis points of pressure to fiscal 2027 annual recurring revenue (ARR) growth, with pricing facing a further 50 basis point headwind as Adobe laps earlier Creative Cloud increases.
It cut net new ARR estimates for fiscal 2027 and 2028 by roughly $470 million and $500 million, to $1.5 billion and $1.35 billion, taking total ARR growth to 5.3% and 4.5% year-over-year, 200 to 300 basis points below Street estimates.
Citi also lowered its fiscal 2027 non-GAAP gross margin estimate by 70 basis points to reflect unmonetized AI inference costs, and sees sharply lower revenue in fiscal 2028 alongside modest margin degradation.
Wall Street analysts downgrade HubSpot on weak Q4 outlook
Four Wall Street firms have downgraded HubSpot after the software company's weaker-than-expected fourth-quarter outlook pointed to a worsening demand environment.
HubSpot's third-quarter revenue grew 17% at constant currency, a 2-point beat, but it guided fourth-quarter growth to 12%, below consensus of 13.8%. Management said budget scrutiny, price sensitivity and longer sales cycles had become more pronounced and are likely to persist into 2027.
The company added 5,300 net new customers in the quarter, below the 5,600 expected, and now expects fewer than 5,000 in the fourth quarter, while net revenue retention slipped to 101% from 103% a year ago.
BTIG cut HubSpot to Neutral from Buy and lowered its 2027 growth forecast to 11% from 14%. Analyst Nick Altmann said the stock looks appropriately valued at about 10 times 2027 estimated free cash flow.
KeyBanc downgraded the stock to Sector Weight. "We recognize this is late, but we believe there is little room for improvement between now and when we get formal 2027 guidance next February and are downgrading to Sector Weight," analyst Jackson Ader wrote.
Cantor downgraded HubSpot to Underweight with a $170 price target. Analyst Matthew VanVliet said the company's new European pricing effectively amounts to a price cut and that its AI tools are underperforming peers.
"We no longer see HUBS as a premier SaaS asset that deserves the benefit of the doubt," he said.
Separately, Morgan Stanley also cut HubSpot to Equal-weight from Overweight and trimmed its price target to $229 from $287.
Original Article
5 big analyst AI moves: Is the historic AI stock rout a buy opportunity?
Equity positioning suffered one of its sharpest weekly drops on record: DB
