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Truist Downgrades Analog Devices, Inc. (ADI) to Hold, Citing Peak Growth and Challenging Returns Ahead

Usman Kabir
·4 min read

We recently compiled a list of the 20 Trending AI Stocks on Latest Analyst Ratings and News. In this article, we are going to take a look at where Analog Devices, Inc. (NASDAQ:ADI) stands against the other AI stocks.

The latest developments in the AI industry from a business perspective highlight a growing momentum, driven by significant investments, innovative product launches, and both regulatory and market challenges. One notable development is the rise of Safe Superintelligence, a company founded by previous OpenAI bigwig Ilya Sutskever, which recently secured $1 billion in funding to advance AI systems with a focus on safety. This significant capital raise from major venture capital firms like Andreessen Horowitz and Sequoia Capital underscores the growing concerns around AI safety, as companies work to ensure that AI technologies are both powerful and aligned with human values. Similarly, the market selloff of Wall Street's favorite GPU maker following a stellar earnings report, resulting in a market value loss of close to $280 billion, reflects investor anxieties over the sustainability of AI growth, compounded by concerns over regulatory scrutiny.

Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.

Another major business development that investors should keep an eye on is the purchase of  AirTrunk by investment firm Blackstone for over $16 billion. AirTrunk, a data center operator, significantly boosts the position of the investment titan in the rapidly expanding AI infrastructure market. Data centers are expected to require up to $2 trillion in investment globally over the next five years to meet the demands of AI technologies, and the AirTrunk acquisition signals strong confidence in this growth by top investment managers. Data center expansions are critical as companies like OpenAI and Anthropic roll out enterprise-grade AI services, which demand immense computing power. For example, Anthropic recently launched Claude Enterprise, a robust AI chatbot, that caters to organizations that need advanced features like larger context windows and GitHub integration, aiming to streamline business operations through AI.

Read more about these developments by accessing 10 Buzzing AI Stocks According to Goldman Sachs and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.

Our Methodology

For this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular among hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A technician working on power management in a semiconductor factory.

Analog Devices, Inc. (NASDAQ:ADI)

Number of Hedge Fund Holders: 64 

Analog Devices, Inc. (NASDAQ:ADI) designs, manufactures, tests, and markets integrated circuits (ICs), software, and subsystems products. Truist recently downgraded the stock to Hold from Buy with a price target of $233, down from $266. In a research note accompanying the downgrade, the advisory claimed that industry revenue growth in the semi world had peaked and was entering a slow fade, while stock investment returns had been robust cycle-to-date, making significant additional returns from here more challenging. However, Truist recognized that the fundamentals of the firm appear to have recently bottomed, raising hopes of a significant recovery in 2025.

The advisory further noted that Analog Devices, Inc. (NASDAQ:ADI) stock was trading at 28x estimated 2025 earnings. Per the investment firm, this represented an historical peak for the company, underlining that much of Analog Devices' potential upside was already embedded in the stock price.

Overall ADI ranks 11th on our list of the trending AI stocks on latest analyst ratings and news. While we acknowledge the potential of ADI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

 

Disclosure: None. This article is originally published at Insider Monkey.