Stocks for the Next Stages of the Artificial Intelligence Boom
The Morningstar Investment Conference unveiled stocks set to capitalize on the AI boom. Key insights reveal strong opportunities in semiconductors, software applications, and companies effectively utilizing AI technology. Nvidia, Microsoft, Meta, and others are among the recommended stocks influenced by their competitive advantages.
A recent panel at the Morningstar Investment Conference turned the spotlight on companies that stand to thrive in the next wave of the artificial intelligence (AI) boom. Investors aiming to capitalize on this evolving tech landscape are advised to keep an eye not just on the firms crafting the technology, but also those adept at utilizing it. Morningstar’s Brian Colello emphasized that, as robust as the current AI offerings are, advancements will continue over the next five to ten years, citing a strong supply-demand dynamic for the tech.
During the panel discussion titled “Today’s Thoughts on Tomorrow’s AI Industry”, Colello joined colleagues Eric Compton and Dave Sekera. They kept the audience buzzing about AI’s potential longevity and which stocks are set to benefit. According to them, the most promising stocks fall into three categories: those specializing in differentiated hardware, those with expansive scale and distribution, and those already using AI effectively or possessing unique data assets.
First up is Nvidia, firmly rooted in the semiconductor industry. Colello called Nvidia a “wide economic moat name,” citing its competitive advantages not only in AI hardware but software, too. With a current price/fair value of 1.06, it’s a compelling pick.
Next, there’s Taiwan Semiconductor Manufacturing, another semiconductor giant, valued at 1.19. Sekera highlighted it as a “4-star stock” with superior tech expertise. This company leads the charge in designing and manufacturing cutting-edge chipsets, which is crucial in the evolving AI marketplace.
Marvell International comes into the picture as well, holding a price/fair value of 0.84. Sekera noted, “With AI, it’s not standalone. You have to be able to network all these chipsets together…” He foresees benefits for Marvell as the firm adapts chipsets for heightened efficiency with AI accelerators—a crucial theme moving forward.
Meta Platforms has made headlines thanks to its innovative use of generative AI. Sekera mentioned its efforts in individualizing marketing for clients, assigning it a price/fair value of 0.92. Meanwhile, Amazon is utilizing AI to enhance the shopping experience as well as improve its drone distribution system, valuing it at 0.89.
When it comes to software infrastructure, Microsoft is captivating attention with its $0.97 price/fair value. Sekera noted its cloud platform’s impressive 30% growth rate, and its AI innovations, including embedding Copilot into their Office products.
Alphabet, known for its search engine enhancements through AI, is valued at 0.7. Sekera discussed how Google is evolving its AI platform, Gemini, for broader applications within its product ecosystem, striving to become a more intelligent assistant.
According to Sekera, 2023 marks a shift where the market will increasingly focus on companies effectively integrating AI into their offerings. This could lead to innovative services and products driving growth. Companies like Palo Alto Networks use AI for real-time threat monitoring in cybersecurity, priced at 0.96. Salesforce has also started implementing AI into their operations, achieving a rapid revenue growth, with a price/fair value of 0.83.
ServiceNow, priced at 0.99, is expanding its AI use across various products, which Sekera forecasts will quadruple their sales next year. As the AI boom continues, these sectors and companies could be integral to investors looking for the next big opportunity in tech.
The Morningstar conference highlighted several key stocks poised to flourish in the AI boom. Firms specializing in semiconductors, software, and efficient AI utilization stand out. Nvidia, Taiwan Semiconductor, Microsoft, and others are positioned to ride the AI wave as they leverage advancements in technology, making them potentially lucrative investments. As the AI landscape evolves, staying attuned to these developments may prove beneficial for investors hitting the market.
Original Source: www.morningstar.com
