The AI boom’s initial surge sees Nvidia spearheading a remarkable 73% surge this year, underscoring robust market enthusiasm for AI technologies.
Goldman Sachs delineates the AI revolution into four distinctive phases, spotlighting opportunities within semiconductors, software/services, and the proliferation of productivity gains across various sectors.
Phase 2 features stocks such as TSMC and Intel, showcasing promising growth potentials, while Phase 3 pivots attention towards software firms like Meta and ServiceNow, as they fortify their products with AI integration.
Nvidia Sparks Enthusiasm for AI Investment
Nvidia, renowned for its computer chips powering AI, emerges as the emblematic figure of the AI investment surge, with its shares skyrocketing by 73% this year alone.
The surge in demand was sparked less than eighteen months ago by the introduction of OpenAI’s ChatGPT, establishing Nvidia as the clearest near-term beneficiary in the market.
Despite this substantial upsurge, Nvidia’s forward price-to-earnings ratio remains largely unaltered, as its earnings projection keeps pace with its stock ascent.
Nevertheless, Goldman Sachs warns that as companies expand, sustaining rapid growth and high margins becomes arduous, hinting that even Nvidia will eventually witness a deceleration in its growth trajectory.
Expanding AI Infrastructure and Sales Beyond Nvidia
The unfolding AI revolution manifests in four distinct phases, with Nvidia spearheading the initial phase. Phase two shifts focus towards AI infrastructure, shining a spotlight on semiconductor firms, cloud providers, data center Real Estate Investment Trusts (REITs), hardware and equipment manufacturers, security software stocks, and utilities companies.
Noteworthy entities like TSMC, Intel, and Global Foundries garner attention for their anticipated robust EPS growth coupled with modest valuations. Meanwhile, the third phase centers on AI-integrated sales, benefiting software and IT service providers such as Meta, MongoDB, Intuit, Nutanix, ServiceNow, and Uber.
These companies are poised to augment their revenues through AI-powered offerings, with their stock performance closely tied to that of Nvidia.
AI Productivity: Mastering the Ultimate Challenge
The fourth phase of the AI trade zeroes in on companies harnessing AI to enhance productivity across diverse industries, with the most substantial potential gains anticipated in labor-intensive sectors.
According to Goldman Sachs, software and IT services, alongside commercial and professional service firms, stand to reap significant benefits from AI automation, leading to considerable reductions in labor costs.
Companies like Match Group and News Corp serve as prime illustrations of entities poised to experience remarkable productivity enhancements through widespread AI integration.
