Rate this post
Three big tech companies will experience huge growth in the coming years thanks to their early adoption of generative artificial intelligence, according to a Wall Street analyst. We agree and add AI to that list of beneficiaries. Needham’s Laura Martin sees club names Amazon ( AMZN ), Alphabet ( GOOGL ) and Microsoft ( MSFT ) as “front runners” in the race for tech companies competing in generative AI. In a research note on Thursday, the analyst said the three companies will grow their market capitalization past $3 trillion because of their deep pockets to invest in large language models (LLMs) — artificial intelligence algorithms trained to respond to human-like text. Apple (AAPL), also the club’s namesake, was the first company to hit $3 trillion in market capitalization. This happened in the summer. Rumors of a Chinese crackdown on government employees using iPhones have pulled the stock back below that milestone, accelerating its decline over the past two sessions. While bullish on Apple, Martin thinks it will be dwarfed by “generative AI” companies. AAPL NDAQ YTD Mountain Apple Vs. NASDAQ YTD PERFORMANCE The huge rally in big tech this year, despite some stumbles of late, stemmed from AI hype that sent the Nasdaq up more than 31% in 2023. Jim Cramer believes in AI as a transformative technology, not a flash in the pan. Earlier this year, Jim awarded Nvidia (NVDA) “own it, don’t trade it” status, noting the incredible demand for high-speed semiconductors that power AI functions and services like ChatGPT from Microsoft-backed OpenAI. Nvidia’s latest quarter did not disappoint. Shares of Nvidia are set to triple in 2023. Jim is also high on the AI capabilities of Amazon and Alphabet, as well as chip designer Broadcom ( AVGO ) and enterprise software companies Oracle ( ORCL ) and Salesforce. He thinks Apple — another of the club’s “own it, don’t trade it,” stocks — could benefit even more from AI, saying Thursday that many people falsely think Apple isn’t developing the technology. On Apple’s latest earnings call, CEO Tim Cook emphasized the importance of AI and talked about how the company has been researching it for years. At Needham, Martin included Amazon, Alphabet and Microsoft for their “first mover advantage” in generative AI, citing their ownership of cloud environments to drive the LLM. Furthermore, each firm has its own proprietary data, which is the basis of AI. “High-quality data that is most relevant will allow generative AI to create the best new content and products, and or save costs through better online customer service,” Needham wrote. We see these three big tech names as AI enablers who are going to be winners in the nascent AI industry because they make it easier for other companies to adopt generative AI into their businesses and workloads. Here are some recent developments that show how each is advancing its AI capabilities. GOOGL YTD MOUNTS ALPHABET YTD PERFORMANCE During the recent AI conference, Alphabet announced advancements in its AI infrastructure portfolio with a series of new products that help companies train models in its cloud. This includes a partnership with Nvidia to allow developers to build and train their own models for the best infrastructure. By late 2023, Google Cloud, which Jim previously said was “still in its infancy,” is expected to grow at least 20% year-over-year and at least 15% in 2024, according to Baird. Analysts note that it will surpass YouTube as the company’s second-largest revenue segment. MSFT YTD Mountains Microsoft YTD Performance In the coming quarters, Microsoft will increase capital spending to invest in Microsoft cloud growth and demand for AI services. As we’ve written before, that could hold back revenue growth in the back half of the year, but Jim is buoyed by the company’s new generative AI subscription service, which will bring in recurring revenue from enterprise customers. He calls Microsoft the No. 2 AI stock in the portfolio, followed by Nvidia) and would consider adding to Club’s MSFT position on a pullback as indicated by Club’s 1 rating. AMZN YTD Mountain Amazon YTD Performance We also expect Amazon’s “highly profitable” Amazon Web Services cloud unit as the company adds AI-powered AWS tools, Jim said earlier. Amazon’s enterprise tools in the cloud help consumers and businesses become more productive. Later this year, Amazon will hold a cloud computing conference called re:Invent. Morgan Stanley expects Amazon to announce new partnerships in AI as well as AI-powered AWS tools that will “drive growth in the future.” (Jim Cramer’s Charitable Trust long AMZN, NVDA, GOOGL, MSFT, AAPL, AVGO, ORCL, AVGO. See here for a complete list of stocks.) As a member of the CNBC Investing Club with Jim Cramer, you’ll receive trading instructions from Jim before he trades. Jim waits 45 minutes after a trade alert is sent before buying or selling stocks in his charitable trust portfolio. If Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade alert before executing a trade. The above Investing Club information is subject to our terms and conditions and privacy policy, including our disclaimer. No fiduciary obligation or duty shall exist or be created by your receipt of any information provided in connection with the Investment Club. No specific results or profits are guaranteed.
A person walks next to the Google Cloud logo at the Mobile World Congress (MWC) on February 27, 2023 in Barcelona, Spain.
Nacho Doses | Reuters
Three big tech companies will experience huge growth in the coming years thanks to their early adoption of generative artificial intelligence, according to a Wall Street analyst. We agree and add AI to that list of beneficiaries.
Share this:
- Click to share on Twitter (Opens in new window)
- Click to share on Facebook (Opens in new window)
- Click to share on Telegram (Opens in new window)
- Click to share on Pocket (Opens in new window)
- Click to share on Pinterest (Opens in new window)
- Click to share on WhatsApp (Opens in new window)
- Click to share on Reddit (Opens in new window)
- Click to share on Tumblr (Opens in new window)