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Chat GPT has sparked interest in the field of artificial intelligence.
Now other industry players are also throwing their hats in the ring.
On Thursday, Credit Suisse revealed who it believes will be among the winners in this area.
Since Chat GPT was launched late last year, interest in artificial intelligence and its potential impact on society has grown steadily. Speculation has also increased as to which companies will prevail in this space. The investment community appears to be taking the issue seriously.
“In recent years, we’ve seen a range of investment trends: from meme stocks to cannabis to Web 3,” Morgan Stanley analyst Edward Stanley said in a recent note to clients. “Yet, something suggests that the AI hype is worth serious consideration: the marketability of the product. Finally, Chat GPT is the fastest platform to reach 1 million users and 100 million page views.”
And here is the statement from UBS Global Wealth Management CIO Solita Marcelli: “The broad market for AI hardware and services is worth almost USD 36 billion in 2020, based on data from IDC and Bloomberg Intelligence. We expect the market to grow at a CAGR of 20 percent to $90 billion by 2025,” Marcelli said in a note to clients. “Our estimate may turn out to be conservative.”
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Credit Suisse also seems to be convinced of the new technology. In a note on Thursday, the bank highlighted companies entering the space that it believes will benefit their stock prices. They referred to them as “Top Picks”.
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Two of the companies are from the USA: Microsoft (MSFT) and Nvidia. For the software company Microsoft, the bank sees an opportunity in artificial intelligence to increase its sales by 20 percent.
“We found that Microsoft has found a way to generate potential revenue of approximately $40 billion (up approximately 20 percent from FY22) and an EPS potential of over two Dollar (20 percent + rise over FY22). And that, probably over a period of more than five years (with an annual increase of about 3.5 percent in revenue and EPS growth) through the monetization of OpenAI technology in MSFT’s productivity suite and premium GPT-integrated offerings,” wrote Team of analysts led by Sam Badri.
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Badri’s 12-month price target for Microsoft shares is $285. That’s an upside potential of 14 percent from current levels.
Semiconductor company Nvidia dominates the market for GPUs for AI training with a market share of 95 to 100 percent, according to Credit Suisse. These units are used for things like video games and AI imaging. Forecasts already assume that the company will have a need for up to 30,000 new units as part of the AI acceleration.
“While investors have feared challenges to Nvidia’s leading market position, none have materialized to date,” wrote a team of analysts led by Chris Caso. “We believe that Nvidia’s significant investments in software represent the competitive moat. This will maintain the lead and provide another catalyst for the monetization of this software, which has only just begun. Nvidia remains our top pick among US semi-manufacturers due to the AI opportunity.”
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Caso’s one-year target price for Nvidia is $275, which represents an 18 percent upside potential.
Asian technology companies were also on the list
The bank also highlighted four Asian tech companies it believes will become major players: Taiwan Semiconductor Manufacturing Company (TSM), Accton Technology (2345.TW), Wiwynn (6669.TW) and Baidu (BIDU).
The analysts say the increasing AI use cases will help Taiwan Semiconductor Manufacturing Company and its high-performance computing business. Their business has already doubled since 2016.
At Accton, a manufacturer of IT hardware, the increasing demand will have a positive effect on sales of adapters and switches that contain a new coolant. Credit Suisse’s 12-month price target for the stock is $330, which translates to 16 percent upside potential.
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Wiwynn, another IT hardware manufacturer, is another top pick for the bank, as it counts Meta, Amazon, and Microsoft among its customers. “We expect that Meta’s shift in infrastructure strategy to a native AI architecture and Microsoft’s continued leadership in generative AI services (e.g., OpenAI’s ChatGPT) will directly contribute to better Wiwynn revenue growth,” said the analyst Harvie Chou.
Chou has a target price of NT$1,100 for the stock, which represents an upside potential of 13.5 percent.
As for Baidu, the company will release its AI chatbot “Ernie Bot” on March 16 and has the potential to impact various areas of the AI industry, according to the bank.
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“We believe Baidu is best positioned within Chinese internet operators to leverage advances in generative AI technology as its full-stack AI capabilities, robust China-based datasets and user queries combine to create a flywheel effect. They could also have a far-reaching impact on its search ads and AI cloud business,” said Kenneth Fong, the bank’s China Internet Analyst.
Fong’s target price for the stock is HK$171, which represents an upside potential of 26.9 percent. Both Taiwan Semiconductor Manufacturing Company and Baidu are traded on US exchanges, while Accton and Wiwynn are traded in Taiwan.
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