JPMorgan raises Meta rating to overweight thanks to AI agents opportunity
JPMorgan Chase & Co. raised Meta Platforms' rating from neutral to overweight, while increasing its price target from $640 to $820, noting that the company's push toward advanced AI models and AI agents opens up a new growth path beyond advertising.
Analyst Doug Anmuth said that Meta's hyperintelligence lab had effectively achieved its goal of reaching the frontiers of advanced technology within a year, thanks to a rapid pace of model releases culminating in Muse Spark 1.3, which he described as capable of competing with Cloud and GPT models. He anticipates that an upcoming model, known as Watermelon, will unlock further opportunities across consumer products, engagement, advertising, and internal efficiency.
Muse's proxy gained strong early momentum, reaching number three in the US App Store on its second day. While monetization isn't a near-term priority, Anmuth pointed to the potential of commissions and subscriptions in a market he estimated to be worth tens of trillions of dollars. He also noted that there's still significant room for growth in mainstream advertising through improved targeting and AI-powered content creation.
Anmuth forecasts that Meta's capital expenditures will reach $243 billion in 2027 and $284 billion in 2028, both exceeding consensus estimates. His $820 target is based on a 23x estimate of $35.44 earnings per share for 2028, though he notes that this estimate may be conservative.
JPMorgan recommends accumulating shares of US-based SK Hynix.
JPMorgan Chase & Co. launched coverage of SK Hynix’s American Depositary Receipts (ADRs) with a rating above market weight and a price target of $245 by June 2027, betting that the AI-driven memory recovery cycle is still years away.
The analysts wrote: “We expect the AI-driven memory recovery cycle to extend for more than 5 years, and we expect SKH to achieve a compound annual growth rate in earnings per share exceeding 34% over the next two years, describing the cycle as still being in the middle of its course, with ten quarters of rising average selling prices (ASPs) against an expected path of more than 20 quarters of positive growth in average selling prices from Q1 2024 to Q4 2028.”
Analysts highlighted that SK Hynix secured over 50% of its production capacity through long-term agreements and increased total shareholder returns to over 50% of free cash flow, considering this a strong factor for revaluation. JPMorgan Chase & Co. projects total shareholder returns to reach approximately 42% from 2026 to 2028.
SKHY trades at a premium of more than 30% compared to its domestic counterparts, but it still reflects a discount of about 20% compared to its US counterpart, Micron Technology, even though SKHY is not lagging behind in terms of fundamentals, according to analysts, who pointed to similar or superior memory margins, size, and performance in HBM memory.
While differences in corporate structure and governance remain a structural factor behind this discount, JPMorgan Chase & Co. sees ample scope for reassessment as these structural gaps narrow.
They added: We are optimistic about the memory revaluation story and recommend investors accumulate.
JPMorgan picks KLA as top chip equipment stock thanks to shifting factory mix
In a separate note, JPMorgan Chase & Co. raised its outlook for the WFE (Wave Equipment) market and picked KLA Corp. as its top pick among U.S. WFE makers, citing relatively weak performance and an anticipated shift in the mix toward spending on factories and logic.
Analyst Mio Shikanai raised his WFE market growth estimates to 31% for 2026 at $163 billion, 38% for 2027 at $225 billion, and 17% for 2028 at $263 billion, representing a compound annual growth rate (CAGR) of 28% from 2025 to 2028.
These adjustments were primarily driven by DRAM and TSMC, with supply expected to remain below demand until 2028 and TSMC's advanced production capacity expected to remain above 100% utilization. Shikanai stated that cloud service providers are accelerating their investments in response to the continued growth in AI-related demand, with the four largest US players projected to grow their spending at a compound annual growth rate of 58% through 2028.
Shikanai explained that it sees the best risk/reward ratio in KLAC given its relatively weak performance since the beginning of the year, its reduced market exposure to plant and logic-led WFE spending in 2027, and the potential for upward revision of consensus revenue estimates.
KLA's stock has risen nearly 50% this year, but it has lagged behind its peers Lam Research and Applied Materials, which have climbed 85% and 82% respectively, as these two companies have benefited more directly from memory-related spending. Shikanai predicts that the mix will shift toward factories and logic in 2027, which will disproportionately benefit KLA, while the rising capital expenditure budgets of customers like Intel Group allow it to exceed consensus forecasts.
Bernstein highlights an AI-enabled entry point in Shopify stock
Bernstein Bank launched coverage this week on Shopify with an outperformance rating and a $160 price target, with analyst Mark Shmulik arguing that despite the risks the company faces from robocommerce, native AI alternatives, and vibe coding, these same forces should expand the market that Shopify serves rather than shrink it.
Shmulik described the risks of AI disruption as a storm in a teacup, pointing to the strong adoption of Shopify's product catalog by chatbots and merchants' preference for keeping transactions within the Shopify payment platform for security and fraud management reasons. He highlighted that the hype surrounding automated payments quickly faded after the launch of ChatGPT Checkout, which fell short of expectations.
Shopify has grown to capture approximately 14% of the US e-commerce market share, with over half of its sellers located outside the United States and generating 50% of its gross merchandise value (GMV) outside North America. International, physical, and business-to-business (B2B) channels now account for over 60% of total sales volume.
Bernstein modeled global merchandise value growth at a compound annual growth rate (CAGR) of approximately 24% from 2025 to 2030, with revenue growth of around 25% and free cash flow growth of approximately 32%, based on the premise that free cash flow growth > revenue growth > merchandise value growth > market growth. Shopify is currently trading at 9x 2027 revenue and 45x 2027 free cash flow, which is below its historical range of 10-12x future revenue and around 70x free cash flow.
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Shmulik wrote: Ignore the noise, this is your AI-enabled entry point.
Morgan Stanley upgrades Synopsys and downgrades Infineon
Morgan Stanley upgraded Synopsys to above market weight and became more selective in European semiconductor stocks, citing widening valuation divergence and signs that the memory cycle is nearing a late turn.
Analyst Lee Simpson said the bank maintains a positive outlook on the sector overall, supported by strong demand for artificial intelligence and a broader cyclical recovery, but added that as memory approaches a tipping point, we are becoming more selective.
For Synopsys, Simpson highlighted an attractive entry point following the recent valuation decline, increased confidence in the synergies resulting from its acquisition of Ansys, a resurgence in design intellectual property, and an underappreciated opportunity in physical AI. He maintained his $500 price target, based on a forward price-to-earnings (P/E) ratio of 30 to 35.
In contrast, Morgan Stanley downgraded Infineon to neutral market weight from overweight, noting that while the structural opportunity in data centers remains compelling, it sees near-term upside limitations and a lack of a clear catalyst, lowering its price target to €65 from €81.
