Raymond James lifts Akamai to Strong Buy after ‘AI Is Dead’ selloff

Investing.com -- Raymond James upgraded Akamai Technologies to Strong Buy from Outperform in a note Tuesday, telling investors that last week’s pullback created an attractive entry point.

It maintained its $170 price target on Akamai. Shares are up 1.4% premarket.

Analyst Frank Louthan said the “AI Is Dead” trade, driven by credit risks and fears of higher rates, hit Akamai in particular. The company faces a $5.5 billion capital commitment to generate more than $11 billion in revenue from Anthropic.

“We believe the pullback creates a compelling long-term opportunity,” Louthan wrote.

The analyst said investors’ main objection to the Anthropic deal last month was Akamai’s cost of capital relative to expected returns. With rates now expected to rise, that concern has grown, with Louthan stating that the market is also likely worried about whether AI companies such as Anthropic can stay funded to meet their obligations.

Raymond James acknowledged it cannot be certain that Anthropic will be able to fulfill the deal. However, it noted that Anthropic is generally viewed as having about $520 billion in infrastructure-related obligations over the next seven to 10 years. Akamai represents less than 3% of that total.

Louthan said this means cutting Akamai would not represent a material cost saving. He added that Akamai has a more differentiated cloud than other providers Anthropic relies on and is not a direct AI competitor.

“We do not expect this to be a popular call in the short term, but over the next 12 months, we expect AKAM to rebound as it sees revenue from Anthropic and other Inference Cloud customers,” he said.

Original Article

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