Will artificial intelligence revolutionize the global economy, ushering in an era of booming productivity and, in turn, soaring stock prices? Or is this just another speculative bubble that ends up trapping investors? That’s the debate on Wall Street right now — with major voices in both camps.
David Trainer, founder and CEO of investment research firm New Constructs, said: wealth Earlier this summer, he worried that investors were jumping too fast by betting on richly valued AI-related stocks. “What we’re seeing is just one fad after another. It’s FOMO and more and more stocks are going up to ridiculous heights…Investors have to be very careful,” he warned.
But analysts at Goldman Sachs, led by Vice President of U.S. Equity Strategy Ryan Hammond, said in a Monday research note that they remain bullish on artificial intelligence.
“Our economists argue that AI should increase worker productivity and increase business revenue. Alternatively, AI adoption could allow some companies to generate the same amount of revenue but with lower labor costs, thereby increasing profits,” Hammond and his team wrote.
Analysts believe that while the timing of large-scale AI adoption remains “highly uncertain,” the technology should have “meaningful macro impact sometime between 2025 and 2030” and begin before then. Improve corporate profitability.
For stock market investors, this means opportunity, so Hammond and his team highlight key companies that will benefit from AI in the short and long term. Here’s how they break down.
Short-term winners: Chipmakers and data centers
First, in the short term, Goldman lays out three categories of AI winners: so-called enablers, hyperscalers and empowered users.
“Enablers” include major producers of the underlying hardware that allows AI to operate, such as semiconductors and related equipment. These are the “picks and shovels” of the AI ”gold rush”. Goldman highlighted semiconductor makers Nvidia and Marvell Technology, as well as Credo Technology Group, which supplies cables and other hardware for data centers, as preferred “enablers” for investors.
Then there are the “hyperscalers.” These are big tech companies, including Microsoft, Alphabet, and Amazon, whose cloud computing divisions should benefit from the mass commercialization of AI-generated AI chatbots and related technologies that rely heavily on cloud computing resources and infrastructure for training and operations .
Finally, there are “authorized users”—tech companies that are already using AI to expand their products and services.The list includes social media giant Meta Platforms, which is using artificial intelligence to improve targeted advertising and has several generative artificial intelligence models of its own, and software provider Adobe, which has merge AI in Photoshop. Financial software company Intuit also made the list, along with customer relationship management (CRM) software giants Salesforce and ServiceNow.
Long run: Increased output, reduced labor force
In the long run, Goldman Sachs expects that AI will not only increase worker productivity, but also allow some companies to cut headcount. Combined, these effects should reduce labor costs and increase revenues, thereby boosting revenues.
Hammond and his team didn’t give a timeline for when they expect widespread adoption of artificial intelligence to boost company profits, but they did offer a fairly optimistic forecast.
“Our framework implies that the median return for Russell 1000 stocks could be 19% higher than the baseline through the widespread adoption of AI and improved labor productivity,” they wrote, citing a report that tracks the top 1,000 U.S. market cap companies. index of companies.
Large companies seem to have bought into these predictions. Businesses are still betting big on the technology despite recent signs that the surge in AI-related stocks may be a bubble. Billions of dollars have been spent on AI initiatives and investments this year alone, from publicly traded telecom giants like AT&T to venture capital funds like Bessemer Venture Partners. While the public hype over ChatGPT has died down, business executives are still concerned about AI.
Just look at the steady rise in mentions of the technology on corporate earnings calls. Despite a week left in August, mentions of the word “artificial intelligence” have hit a new monthly high.
For investors looking to get in on the long-term winners in artificial intelligence, Goldman Sachs recommends focusing on two key characteristics. Those companies that stand to benefit the most from AI have high labor costs relative to their revenues, and can use AI to reduce a significant portion of these costs.
Goldman Sachs analysts said these companies typically belong to industries with large white-collar workers, including software, consumer goods and professional services.
Goldman Sachs used this framework to create a panel of 50 companies it believes will be “long-term beneficiaries of artificial intelligence.” Here’s the full list:
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