- ChatGPT has stirred interest in the artificial intelligence space.
- Now other industry players are throwing their hat in the ring.
- On Thursday, Credit Suisse highlighted who they think will be winners in the space.
Speculation on which firms will come out as formidable players in the space has also grown, and the investment community seems to be taking it seriously.
“In recent years we’ve witnessed a number of investing fads: From meme stocks to cannabis to Web 3,” said Morgan Stanley analyst Edward Stanley in a recent note to clients. “Yet, something suggests the AI hype is worth considering seriously…product market fit. After all, ChatGPT is the fastest platform to a million users and fastest to 100 million site views.”
And here’s UBS Global Wealth Management CIO Solita Marcelli: “The broad AI hardware and services market was nearly USD 36bn in 2020, based on IDC and Bloomberg Intelligence data. We expect the market to grow by 20% CAGR to reach USD 90bn by 2025,” she said in a client note. “Our estimate may prove to be conservative.”
Credit Suisse also appears to be bullish on the new technology. In a note on Thursday, the bank highlighted companies stepping into the space whose share prices they think will benefit, labeling them “top picks.”
6 artificial intelligence stocks to watch
For software firm Microsoft, the bank said AI provides an opportunity to grow its revenue by 20%.
“We found that MSFT has a path to generating ~$40B of potential revenue (~20% uplift vs FY22) uplift for MSFT and over $2 of EPS potential (20%+ uplift vs FY22), likely over a period of 5+ years (adding ~3-5%/year to revenue and EPS growth), from the monetization of OpenAI’s technology in MSFT’s productivity suite and premium GPT-integrated offerings,” a team of analysts led by Sam Badri wrote.
Badri’s price 12-month price target for shares of Microsoft is $285. That’s upside of 14% from current levels.
And for semiconductor firm Nvidia, it dominates the graphics processing unit market for AI training, with 95-100% of the market share, Credit Suisse said. These units are used for things like video games and AI image generation. Projections already estimate the firm will have demand for up to 30,000 new units amid the AI acceleration.
“While investors have feared challenges to NVDA’s leading market position, none have yet become a significant challenge,” wrote a team of analysts led by Chris Caso. “We think NVDA’s considerable investment in software represents the competitive moat that continues their lead, and the monetization of that software – which has only just begun – represents yet another catalyst. NVDA remains our Top Pick in US Semis due to the AI opportunity.”
Caso’s one-year price target for Nvidia is $275, upside of 18%.
The bank also highlighted four tech firms in Asia that they think will become major players: Taiwan Semiconductor Manufacturing Company (TSM); Accton Technology (2345.TW); Wiwynn (6669.TW); and Baidu (BIDU).
The analysts said that growing AI use cases will help Taiwan Semiconductor Manufacturing Company and their high performance computing business, which has already doubled since 2016. Analyst Randy Abrams has a
As for Accton, an IT hardware producer, surging demand will benefit the firm’s sales of its adapters and switches, which contain a new cooling liquid. Credit Suisse’s 12-month price target for the stock is $330, which is upside of 16%.
Wiwynn, another IT hardware producer, is another top pick for the bank, as they include Meta, Amazon, and Microsoft as their clients.
“Notably, on the back of Meta’s infrastructure strategy shift to AI native architecture plus Microsoft’s ongoing leadership on generative AI services (i.e., OpenAI’s ChatGPT), we expect it should directly support better topline expansion to Wiwynn,” analyst Harvie Chou said.
Chou has a price target of NT$1,100 for the stock, meaning 13.5% upside.
On Baidu, the company is set to release it’s AI chatbot “Ernie Bot” on March 16, and has the potential to have hands various parts of the AI industry, the bank said.
“Within the China internet operators, we believe Baidu is best positioned to capture the advancement of generative AI technology given its full stack AI capabilities, robust China-based data sets and user inquiries together could form a flywheel effect and make a far-reaching impact on its search ad and AI cloud business,” said Kenneth Fong, the bank’s China Internet Analyst.
Fong’s target for the stock is HK$171, upside of 26.9%.
Both Taiwan Semiconductor Manufacturing Company and Baidu are traded on US exchanges, while Accton and Wiwynn are traded in Taiwan.