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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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Alphabet is the strongest-positioned stock for the next phase of artificial intelligence as investor attention shifts away from pure capital spending intensity and toward monetization, returns and durable competitive advantages, according to Bank of America.
BofA analysts said sentiment around AI capabilities, incremental revenues and capex returns will remain a key driver of mega-cap internet stocks through 2026.
While AI-related spending continues to rise sharply, the team noted that leading hyperscalers are generating sufficient operating cash flow to fund investment internally, while selectively accessing debt markets to preserve balance-sheet flexibility.
Against that backdrop, Alphabet stands out as “best positioned across all segments,” analysts Justin Post and Nitin Bansal said in a note this week, citing the company’s depth across foundational models, custom silicon, enterprise cloud and consumer distribution.
This breadth becomes increasingly important as the AI trade matures and investors demand clearer evidence of sustainable returns, they added. BofA estimates that AI could unlock more than $1 trillion in incremental revenue opportunities over the next five years.
Alphabet’s relative strength, analysts said, rests on what it describes as four structural moats likely to define long-term AI leadership: frontier model leadership, consumer distribution, enterprise distribution and custom silicon.
Google parent is the only company BofA sees with strong relative positioning across all four areas. That view is underpinned by ongoing Gemini model development, rising demand for Tensor processing units (TPUs), a scaled and growing enterprise cloud business, and multiple large consumer platforms that support both AI training and monetization.
Also this week, Morgan Stanley raised its price target onAppleto $315 from $305 in a new 2026 outlook on the North American IT hardware sector, keeping the stock rated Overweight and reaffirming it as one of the bank’s highest-conviction ideas for the year ahead.
The Wall Street firm said the higher target reflects an increase in Apple’s longer-term earnings power, particularly in fiscal 2027 (FY27), even as rising memory costs emerge as a more visible headwind across the hardware landscape. The update comes as analysts reassess margin dynamics tied to component inflation, especially DRAM.
Analyst Erik Woodring lifted his FY27 earnings per share forecast for Apple to $9.83 from $9.55, citing stronger revenue assumptions that outweigh the expected margin pressure.
While the earnings outlook was revised higher, Woodring said he cut FY27 product gross margin assumptions by around 160 basis points to reflect higher memory input costs.
Apple’s earnings resilience is underpinned by iPhone volumes and pricing, which Woodring said “more than offset” the impact from rising component expenses.
Apple remains one of the few hardware names where demand elasticity is expected to stay relatively contained as prices move higher, supporting both revenue and earnings visibility, he added.
Within Morgan Stanley’s broader sector view, Apple was named to the firm’s “core 5 Overweights” for 2026, alongsideWestern Digital,Seagate Technology,TD SynnexandTeradata, highlighting its preferred positioning as the bank looks into the year ahead.
AI-linked valuation risk has emerged as the dominant threat to market stability in 2026, according to Deutsche Bank’s latest global markets survey, which polled 440 investors and market participants worldwide in mid-December.
In the survey, 57% of respondents identified a sharp selloff in technology stocks, driven by fading enthusiasm around AI, as the biggest risk facing markets next year. That makes AI-related valuation concerns far more prominent than any other macro or financial risk flagged by investors.
“We’ve never had such a big leader in the biggest risks stake for the year-ahead,” Deutsche Bank strategist Jim Reid said in the report. “AI/tech bubble risk towers over everything else.”
The distance between AI risk and other perceived threats is notable. The second-most cited concern, mentioned by 27% of respondents, was the possibility that a new Federal Reserve chair could pursue aggressive interest rate cuts, potentially destabilizing markets.
Worries about stress in private capital markets followed at 22%, while 21% of respondents pointed to the risk that bond yields could rise more than expected. Sticky inflation forcing central banks into surprise rate hikes ranked lower, selected by 15% of participants.
Despite AI dominating the risk landscape, the survey suggests that fears of a U.S. tech bubble have not materially intensified over the past year.
“Whilst bubble risk perception remains high in U.S. tech, it has not increased that much in 2025, and is below levels seen in September, and still below that seen in 2021,” Reid wrote.
Morgan Stanley is urging investors to increase exposure toTaiwan SemiconductorManufacturing ahead of 2026, raising its price target and reiterating the stock as a top pick as AI-driven growth and margin expansion continue to accelerate.
The bank lifted its price target on TSMC to NT$1,888 from NT$1,688 and maintained an Overweight rating.
“[We] recommend increasing positions in TSMC before the start of 2026,” analyst Charlie Chan wrote.
Morgan Stanley expects TSMC to guide 2026 revenue growth in the mid-20% range, but believes actual growth will land closer to 30% year over year.
Based on the forecast 2026 capital expenditure of $49 billion and continued expansion of 3-nanometer capacity, it models 2026 revenue growth of 30%, well above the Street consensus of around 22%.
While Morgan Stanley expects management to initially strike a conservative tone on guidance, it sees a strong likelihood that growth ultimately exceeds initial expectations as the year progresses.
The firm also raised its longer-term AI outlook, revising its estimate for AI semiconductor foundry revenue growth to a 60% compound annual rate between 2024 and 2029.
Morgan Stanley forecasts the total AI chip market could reach $550 billion by 2029, with TSMC generating roughly $107 billion from AI chip foundry services, equivalent to about 43% of total revenue.
Alongside the higher target, the bank raised its 2026 and 2027 earnings estimates, noting that the stock “remains attractive at 16x or 13x our 2026/2027 average EPS,” as sustained AI demand continues to underpin global semiconductor growth.
This week, Goldman Sachs downgraded bothTexas InstrumentsandArmHoldings to Sell, arguing that neither company is well-positioned to benefit from the next phase of the semiconductor upcycle, despite AI-related spending remaining supportive into 2026.
Analyst James Schneider said he expects “AI spending among hyperscalers continuing to move higher,” which should favor Digital, Memory, Storage and semiconductor production equipment names next year.
Schneider said a “gradual industrial & automotive recovery” should help lift analog demand, but warned that the upcycle will drive “more discrimination in Semiconductor stocks,” limiting upside for certain names despite a broadly constructive backdrop.
Texas Instruments was downgraded to Sell from Buy, with Goldman pointing to company-specific execution risks.
While Schneider expects “a constructive backdrop for a broader analog recovery in 2026,” he said Texas Instruments’ “strategic capacity and capital choices this cycle will serve as an idiosyncratic drag that will weigh on the company’s margin and earnings recovery relative to peers.”
Inventory levels are at “record levels,” resulting in “muted margin and earnings expansion into the upturn," he added. Schneider also warned that missing free cash flow targets “will likely weigh on the shares in the medium term.”
Arm was also downgraded to Sell from Neutral, with Schneider citing “limited upside to fundamentals.” The analyst highlighted Arm’s “high Royalty revenue exposure to the smartphone market (~60%)” and said locked-in royalty rates and low unit growth “limit upside to fundamentals in the near term.”
He also expects higher R&D spending tied to AI custom chip efforts to result in “less financial leverage” over the coming years.