Goldman Sachs analysts have identified the stocks best positioned to benefit from the next wave of AI investment, marking a resurgence in AI enthusiasm following concerns about returns earlier this year.
Platform Stocks Recommended
According to Goldman Sachs analysts, the upcoming wave of investment in AI will favor "platform" stocks like Microsoft and Datadog. These platform stocks are expected to play a crucial role in the direct application of AI technology, facilitating broader adoption across various industries.
Shift from Traditional Picks
Goldman Sachs suggests moving beyond the conventional choices such as Nvidia and AI infrastructure companies. Instead, investors are urged to focus on platform stocks that are poised to integrate AI into their applications effectively.
Primary Beneficiaries Identified
The equity analysts at Goldman Sachs believe that platform stocks, particularly those involved in databases and development tools, will reap significant benefits from the next wave of AI investments. These platforms offer the necessary infrastructure for AI utilization and serve as essential building blocks for advanced AI applications.
Top Picks for Investors
Microsoft, DataDog, MongoDB, Elastic, and Snowflake are singled out as the best-positioned platform stocks set to introduce AI-integrated applications. Despite facing challenges this year due to short-term weaknesses, these stocks boast attractive valuations and are expected to perform well as AI investment gains momentum.
Focus on Earnings over Valuations
While the share prices of AI infrastructure companies like Nvidia are forecasted to rise, Goldman Sachs emphasizes that future returns will be primarily driven by earnings rather than valuations. The analysts caution that elevated starting valuations could limit potential returns, urging investors to consider the broader market landscape.
Uncertainty Surrounding AI Monetization
As the market navigates through different phases of AI adoption and monetization, uncertainty remains regarding the timing of significant earnings growth. Phase 3 stocks, focusing on AI monetization through software and IT services, are still in a transitional phase, while Phase 4 stocks, benefiting from widespread AI adoption, are seen as a longer-term play.
Goldman Sachs' insights come amidst a renewed interest in AI stocks, following a period of subdued performance earlier this year. With the AI trade gaining momentum once again, fueled by macroeconomic factors and interest rate adjustments, investors are looking to capitalize on the evolving landscape of artificial intelligence.
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By: kcloonan@insider.com (Kelly Cloonan)
Title: Goldman Sachs Picks Microsoft and Datadog as Top AI Stocks
Sourced From: markets.businessinsider.com/news/stocks/top-ai-stocks-microsoft-artificial-intelligence-goldman-sachs-mdb-snow-2024-10
Published Date: Fri, 11 Oct 2024 15:33:38 +0000
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