The AI trade has been one of the market’s biggest drivers, but not all analysts are staying bullish. Top Erste Group analyst Hans Engel has turned more cautious on Micron (MU), Meta (META), and Broadcom (AVGO), downgrading all three to Hold from Buy. He pointed to rising costs, softer trends in key areas, and more limited upside after recent gains.
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The downgrades suggest that while the AI story remains intact, near-term returns may not be as compelling at current levels.
Micron Benefits from AI Demand but Faces Headwinds
The analyst said Micron continues to benefit from very strong demand, especially for HBM memory used in AI. In fact, its HBM supply is already sold out through 2026, supporting near-term revenue visibility.
However, that strength comes with a cost. The company is ramping up spending to expand production, which is expected to weigh on free cash flow.
There are also signs of cooling in the DRAM market, Micron’s largest segment. Prices have eased recently, and the analyst raised concerns about how long the current memory upcycle can last.
Meta Delivers Strong Growth but Spending Weighs
For Meta, the analyst said the core ad business remains healthy, supported by strong engagement and improved ad performance.
The concern is spending. Meta continues to invest heavily in AI and Reality Labs, and those costs are likely to keep pressure on margins.
While growth remains intact, the balance between spending and returns will be key to watch from here.
Analyst Sees Limited Upside in Broadcom Stock
The analyst said Broadcom remains well-placed in AI, driven by demand for custom chips and networking used in large data centers. Still, with expectations already high, much of the positive outlook appears priced in. That leaves less room for upside, especially if AI spending slows or becomes more selective.
Which AI Stock Is the Best Buy Right Now?
Turning to Wall Street, all three stocks have a Strong Buy consensus. Broadcom offers the highest upside at about 55%, followed by Micron at around 52%, and Meta close behind at roughly 52%.
In terms of Smart Score, Broadcom and Meta both have a score of 9, indicating strong overall signals. Micron has a score of 8, which is also solid.
