Truly innovative technologies seem to emerge once every few decades. Personal computers appeared in the early ’80s, and the Internet really took off in the late ’90s. And now, AI is all the rage.
AI technology has taken the digital world by storm and is being deployed in a variety of applications such as automation systems, marketing, and language translation. The introduction of generative AI in late 2022 has the potential to forever change the way we interact with machines, adding new applications and promising more intuitive use. In other words, AI is the bright spot of this generation.
This technology is here to stay, and that creates opportunities for investors. Jefferies analyst Brent Till takes a deep dive into the workings of the AI sector and identifies several big tech companies as long-term winners.
Till outlines the criteria as follows: “Investments centered around AI ‘picks and shovels’ continue to outperform… AI spending extends to other infrastructure providers and app vendors that enable enterprises to take advantage of Gen AI Our AI KIS basket represents companies that we see are making the most of this transformation opportunity. We advocate investors to position themselves before the introduction of companies in late 2024 to 2020 is in full swing, providing better prospects for economic uplift. ”
Thill’s picks include some of the Magnificent 7’s biggest tech stocks, companies already deeply connected to the expansion of AI: Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) , Meta Platforms (NASDAQ:META). Let’s take a closer look at these celebrities and what Till has to say about them.
microsoft
We’ll start with Microsoft, a stock that Thil describes as a “top AI winner.” We all know this company. Microsoft’s special combination of popular products and sound management has propelled it to the top of the technology world and, in some ways, the economy in general. The company is currently the most valuable publicly traded company on Wall Street, with a market capitalization of more than $3 trillion.
However, the key point in this discussion is Microsoft’s deep commitment to AI. The company is a long-time supporter of his OpenAI, the developer of his ChatGPT chatbot that started the current wave of generative AI technology. Microsoft has supported OpenAI since 2019 and invested an additional $10 billion in the company earlier this year. Note that the usage of ChatGPT has increased significantly in recent months. According to Pew research, 23% of U.S. adults have used a bot in some way, up from 18% seven months ago.
In backing OpenAI, Microsoft isn’t just picking a winner. Microsoft will also have access to his AI chatbot technology, which is integrated into the company’s Bing search engine as well as its Windows operating system and Office software. In a recent software update, Microsoft released Copilot, an AI-based online assistant that provides real-time user assistance on Windows.
Perhaps the more important move for users is the integration of AI into Microsoft’s Azure cloud platform. Azure already provides subscribers with more than 200 software tools and products to meet almost any online need. Adding AI to the mix increases the value of your product and makes it more competitive with competitors like AWS and Google Cloud. As of Microsoft’s Q2 2024 report, Azure already generated $25.9 billion in quarterly revenue.
The report showed total sales of $62 billion, an 18% year-over-year increase and $890 million more than expected. The company’s bottom line was EPS of $2.93, beating estimates by 16 cents per share.
For Till, Microsoft’s full embrace of AI is key, making the company’s stock attractive to investors.
“With our partnership with OpenAI, we believe MSFT is positioning itself as a key beneficiary of Gen AI. Although we are in the early stages of AI adoption, we believe MSFT will continue to increase its turnover in CY24 and beyond. We remain bullish on the Copilot capabilities of Copilot. We emphasize that enterprise interest continues to grow in the bulk of MSFT’s Copilot, which is now generally available. We believe Azure’s contribution to AI will increase visibly in CY24 as we bring it into production and continue to support Azure’s growth and market share expansion.Furthermore, AI products are expected to increase visibly in CY24 as we bring them into production and continue to support Azure’s growth and market share expansion. We believe that decisiveness will increase returns over time,” Thill said.
Unsurprisingly, Till rates MSFT stock a Buy, and his $550 price target suggests 30% upside potential in one year. (Click here to see Thill’s track record)
Big Tech continues to fascinate Street analysts, with MSFT recording 35 recent reviews including 33 Buys, 1 Hold, and 1 Sell, all with a Strong Buy consensus rating. It has become. The stock is priced at $421.44, and the average price target of $471.71 suggests a 12% upside potential over the next year. (look MSFT stock price prediction)
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alphabet
The next stock we’ll look at is Alphabet, best known as the parent company of Google and a company that Thhill describes as “the most undervalued” in AI stock trading. Like Microsoft, Alphabet is a trillion-dollar behemoth with a market capitalization of $1.9 trillion, making it the fourth largest publicly traded company in the world.
Alphabet has built itself through its successful development of Internet search and the resulting monetization of its niche, but the company has not ignored recent developments in AI. Alphabet’s other subsidiaries include self-driving car venture Waymo, which relies heavily on AI technology to control its self-driving cars, which are already on the streets of San Francisco. Alphabet also uses AI to create large language modules on Google Cloud. These are online translation services that use both AI and natural language processing to provide clear text translation, making it easy to create new text in multiple languages.
Of particular interest to investors is that the company is integrating AI into the Google search engine and introducing the P-MAX tool, which uses generative AI technology, into the search engine’s advertising campaign capabilities. This can potentially improve the revenue of your Google Ads campaigns and increase your profit per dollar spent.
The company’s AI efforts haven’t been all glorified. Alphabet recently rebranded its Bard chatbot to Gemini, and it hit the headlines for all the wrong reasons. The generative AI chatbot provided amusingly incorrect interpretations of user requests and appeared unable to generate images of white people at all.
Although this was a serious flaw, it is fixable and Alphabet is working quickly to fix it. AI is the future, but for now Alphabet’s main source of revenue is Google, which was not harmed by this failure.
Quantitatively speaking, Alphabet is expected to maintain a solid revenue of $86.3 billion in the fourth quarter of 2023, up 13% year over year and more than $1 billion more than expected. The company continued to deliver solid fourth-quarter earnings, coming in at $1.64 per share on a GAAP basis, beating expectations by 4 cents.
Analyst Till sees Alphabet’s strong position in online search as fundamental to the company’s future, especially as it embraces generative AI technology. He writes about his stock: “GOOGL is a leader in AI/ML technology and believes we are best positioned to benefit from the consumer opportunity by deploying Gen AI to billions of users. GOOGL has already adapted to this change with its new Search Generation Experience (SGE) and believes it will continue to dominate. Additionally, GOOGL’s P-MAX AI Targeting The tool is already improving advertising ROI, especially for small and medium-sized businesses, and should help generate operating leverage going forward. GCP is still a distant third in the public cloud, but Gen AI is closing the gap on GOOGL. We believe this will give us an opportunity to fill the gap.”
These comments support Thill’s Buy rating on GOOGL, and his $175 price target indicates 13% one-year upside.
Overall, GOOGL’s Strong Buy analyst consensus rating is based on 37 recent reviews, with 27 Buys and 8 Holds. The company’s stock is currently trading at $154.56, and its average price target of $165.37 suggests an additional 7% upside within the next year. (look GOOGL stock price prediction)
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meta platform
Last on Jefferies AI’s list is Meta, the parent company of Facebook, Instagram, Messenger, and WhatsApp, and one of the $1 trillion tech giants in the market. Meta’s current value is $1.27 trillion, making it the sixth largest company on Wall Street.
Meta’s biggest asset is its scale. The company’s last released Q4 2023 report shows solid user numbers. Ending 2023, Meta’s “Daily Active Family Members” (DAP) was 3.19 billion and its “Monthly Active Family Members” (MAP) was 3.98 billion. These numbers count users across all of the company’s platforms and show that Meta can reach nearly half of the world’s total population.
Facebook, Meta’s primary platform, accounts for the largest portion of the company’s total audience, with a total of 2.11 billion daily active users (DAU) and monthly active users (MAU) in December 2023. The total number of people is 3.07 billion. It should be noted that Meta’s platform user count likely includes a high level of overlap between platforms. Still, the company has an influence that rivals any type of company.
On the AI front, Meta has started leveraging this technology in multiple applications. These include marketing and device links, but one of the most important is the company’s AI-based seamless communications, designed to facilitate multilingual translation. It may turn out. The application of such technology to social media platforms, which are already built to support multiple languages, is obvious. Meta also created the Llama model, an open source AI development tool created for multiple applications.
Meta reported solid revenue numbers in its last quarterly release. The release covers the fourth quarter of 2023 and shows revenue of $40.11 billion and earnings per share of $5.33. Sales increased 25% year over year and exceeded expectations by $940 million. Meanwhile, EPS was 39 cents better than expected.
Turning to analyst Brent Till one last time, we see that he has a clear path for Meta’s long-term gains, based primarily on the company’s AI potential. There are approximately 4 billion users across the app family. META is already leveraging AI to improve user engagement and ROI for advertisers. We note that META has already implemented the Gen AI advertiser tool and, according to our checks, it is already leading to improved performance. Moreover, his META with its Llama model has become the backbone of the open source community, and META is well positioned to benefit from its rise. ”
To this end, Till rates META stock a “buy” and has a $550 price target on the stock, implying a one-year upside of nearly 11%.
All in all, Meta is currently trading at $491.35, and the average price target of $530.58 suggests the stock is up nearly 7% by the end of the year. The stock’s “Strong Buy” consensus rating is based on 43 recent analyst reviews, indicating strong interest in the stock, including 40 Buys, 2 Holds, and 1 Sell. It is a biased view. (look Meta stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.