The Growing Popularity and Potential of Artificial Intelligence Stocks
Introduction
The increasing demand for stocks linked to artificial intelligence (AI) has sparked concerns about a potential bubble. However, Goldman Sachs believes that the current rally is justified and has room to grow even further. This article explores the reasons behind this belief and highlights key players in the AI industry.
Strong Fundamentals Supporting the Rally
Goldman Sachs argues that the fast rise in AI-related stocks is supported by strong underlying fundamentals. The valuations in the technology sector are not as stretched as they were during previous bubble periods. Additionally, “early winners” in this sector have exceptionally strong balance sheets and returns on investment. The Goldman strategists, led by Peter Oppenheimer, state that we are still in the early stages of a new technology cycle, leading to further outperformance.
Potential Near-Term Beneficiaries of the AI Revolution
Goldman Sachs has identified a list of 11 stocks across various industries that can potentially benefit from the AI revolution in the near term:
Semiconductors
- Nvidia
- Marvell Technology
- Credo Technology Group
Cloud Computing Infrastructures
- Microsoft
- Alphabet
- Amazon
Empowered Users
- Meta Platforms
- Salesforce
- Adobe
- ServiceNow
- Intuit
Key Players and Recent Developments
Nvidia
Nvidia, with a market value surpassing $1 trillion, has become a leading AI enabler. The company has consistently provided strong forecasts for future demand, attracting significant investor interest.
Microsoft
Microsoft has been a hot AI bet in recent times. The company expanded its investment in OpenAI, a leading creator of AI models, with a multiyear, multibillion-dollar partnership. This move marks the third phase of their collaboration.
Alphabet
Alphabet’s Google unit is also active in the AI space. They announced plans to introduce AI features into their internet search engine, enabling it to provide simple answers to complex queries by combining results from multiple sources.
Empowered Users
Companies like Meta (Facebook and Instagram parent), Salesforce, Adobe, ServiceNow, and Intuit are leveraging AI technology to enhance their businesses. Meta, specifically, is focusing on AI computer chips that will power advanced metaverse-related tasks, including virtual reality, augmented reality, and generative AI.
Conclusion
The growing popularity and potential of stocks tied to artificial intelligence have led to a significant rally. Goldman Sachs believes this rally is justified, as the technology sector valuations remain reasonable, early winners have strong fundamentals, and we are still in the early stages of the AI revolution. As the AI industry continues to evolve, the listed companies have the potential to be significant beneficiaries and generate further outperformance.
