Analysts Highlight Top AI Stocks as Q2 Earnings Season Approaches

As second-quarter earnings reports approach, Wall Street analysts are actively refining their positions on key players in the artificial intelligence sector. Several mega-cap technology firms received bullish endorsements, citing strong cloud growth and new monetization avenues, while valuation concerns have prompted downgrades for some high-flying stocks.

Mega-Caps Tapped as Top Picks

Morgan Stanley described Microsoft (MSFT) as offering a "highly attractive" risk-to-reward profile ahead of its July 29 fiscal fourth-quarter results. The firm set a $600 price target, pointing to expectations for Azure growth in the low-40s percent range and accelerating monetization from its Copilot AI tools. Analysts noted that paid M365 Copilot seats rose to 20 million in the third quarter, providing a tangible metric for commercial traction.

Mizuho Securities named Meta Platforms (META) its top pick among mega-cap tech stocks, reiterating an Outperform rating and an $835 price target. The firm anticipates a solid earnings print, supported by sustained user engagement and advertising growth. A reported deal to lease up to $10 billion in computing power to AI firm Anthropic was highlighted as a key new catalyst and an early sign of return on Meta's significant capital expenditures.

In another key move, Wedbush added Alphabet (GOOGL) to its "Best Ideas List," citing the company's ability to translate its AI capabilities into significant market share gains for Google Cloud. The firm also added Reddit (RDDT) to the list, flagging strong advertising momentum and potential upside from AI data-licensing agreements with Google and OpenAI.

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Semiconductor Outlook and Valuation Concerns

Analysts at Citi view the recent pullback in semiconductor stocks as a buying opportunity, expressing a preference for semiconductor capital equipment makers over chip producers. The bank noted that data centers remain the strongest end market and highlighted encouraging capital spending increases from key firms:

• Intel (INTC) raised its 2026 capex guidance to over $20 billion.
• TSMC (TSM) increased its 2026 capex forecast to between $60 billion and $64 billion, citing strong AI demand.

Providing a more cautious perspective, Jefferies downgraded Datadog (DDOG) to Hold from Buy, citing valuation concerns after the stock's 94% year-to-date rally. Analysts stated their thesis that the company is an AI beneficiary has "largely played out" for now. The firm noted the stock trades at a premium, leaving little room for any potential execution missteps, and said it would look for a better entry point to become more constructive.