Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week.
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Salesforce upgraded at Morgan Stanley, Wolfe
Earlier this week, Morgan Stanley analysts raised their recommendation on Salesforce Inc (NYSE:CRM). Analysts see several vectors for Salesforce to drive top-line upside, especially given “muted” investor expectations.
“Low investor expectations vs potential top-line upside drivers in price increases, product bundling and Data Cloud adoption frame an attractive risk/reward for CRM. While the ramp in GenAI apps may still be >12 months away, Data Cloud likely proves a bridge to better growth in CY24,” Morgan Stanley analysts said in a note.
Wolfe Research analysts also raised their recommendation on CRM stock as they see double digit upside to consensus FCF.
UBS sees more AI-led upside next year
Generative AI stands out as a disruptive and potentially transformative technology with a historical precedent of creating value in various sectors throughout the innovation value chain, UBS analysts said in a note.
The development of generative AI contributes to the creation of new hardware, and its functionality occurs on platforms managed by operators and enablers. The overarching impact is framed as benefiting the broader economy, indicating widespread positive effects across various sectors.
“We expect global AI demand to increase from USD 28 billion in 2022 to USD 300 billion in 2027, based on Bloomberg Intelligence data—a compound annual growth rate of 61%,” UBS's Chief Investment Officer Americas stated.
“In that time, we think the infrastructure segment will grow by 38% and the applications and models segment by 139%. We see upside risk to our estimates given improving visibility on infrastructure spending and broadening AI demand for applications.”
Morgan Stanley shares list of favorite AI stocks
Morgan Stanley analysts believe that the AI sector remains well-positioned, particularly within the software stocks landscape. The investment bank contends that the potential rewards stemming from the significant and transformative impacts of Generative AI (GenAI) outweigh the rising investor expectations implied by the strong stock performance in CY23.
However, the analysts caution that, despite the positive outlook, GenAI may not act as a universal catalyst, considering longer enterprise product cycles and the relatively constrained IT budget environment.
Stocks mentioned in the include Microsoft (NASDAQ:MSFT), Adobe (NASDAQ:ADBE), Snowflake Inc (NYSE:SNOW), Salesforce, HubSpot Inc (NYSE:HUBS), etc.
Macquarie introduces GenAI thematic basket
Macquarie analysts introduced a GenAI thematic basket to offer investors a more diversified exposure.
The analysts expect 2024 to reinforce how the digital and physical worlds are converging into a singular, economic reality.
“We are positioning for a disruptive 2024 in software driven by GenAI, cybersecurity, digital data transformations, and mounting macro risks.”
The basket of stocks consists of Microsoft, ServiceNow Inc (NYSE:NOW), Salesforce, MongoDB (NASDAQ:MDB), CrowdStrike Holdings Inc (NASDAQ:CRWD), Powerschool Holdings Inc (NYSE:PWSC), and HubSpot.
ServiceNow has also been named a Top Pick at Macquarie due to 'substantial' GenAI product potential.
Monness Crespi Hardt bullish on Amazon’s AI opportunity
Monness Crespi Hardt analysts maintained a positive outlook on Amazon.com Inc (NASDAQ:AMZN) deeming the company well-positioned. The analysts reiterated a Buy rating with a $170 price target on the stock.
The analysts note that Amazon is approaching the end of its most demanding time of the year and highlights the company's ability to leverage its strengths in 2024. The investment firm anticipates that Amazon's stock performance in the short term will be influenced by data points related to consumer spending during the holiday season.
“We believe Amazon is well positioned to benefit from digital transformation, capitalize on the cloud, innovate with AI, participate in new healthcare-related opportunities, and leverage a leaner cost structure," analysts said.
