5 Generative AI Stocks That Could be Worth Watching in 2024
The generative AI space is heating up with the major players taking more and more interest in it. Moreover, the influx of generative AI-powered chatbots, especially ChatGPT by Microsoft MSFT backed startup OpenAI, which took the world by storm in 2023, is expected to continue aiding the generative AI boom in the days ahead.
The ability to interact with humans, respond to questions asked in various languages, generate content, classify data and perform coding on the back of large language models (LLM) remains the main reason behind the solid adoption of these chatbots.
Apart from chatbots, the growing proliferation of generative AI infrastructure as a service that is used for training LLMs and specialized generative AI assistant software, on the back of which, generative AI is set to unleash the next wave of productivity, remains a major positive.
Additionally, the rising demand for generative AI-based cloud solutions, which are designed to make business operations and workflow more efficient, is a plus. Moreover, hyperscalers and large cloud software companies are embracing these solutions to strengthen product portfolios and monetize incrementally.
Strengthening Growth Prospects
Given the aforementioned facts, the underlined technology is set to become essential for various industries like IT services, semiconductor, advertisement, hardware and cloud.
This gives us an idea that the generative AI market is set to experience an explosion of growth in the coming years.
A Fortune Business Insights report shows that the global generative AI market size is expected to reach $667.96 billion by 2030, seeing a CAGR of 47.5% between 2023 and 2030.
Per a report from Bloomberg Intelligence, this particular market is set to hit $1.3 trillion by 2032, by witnessing a CAGR of 42% between 2022 to 2032.
Coming to worldwide spending, an IDC report indicates that enterprise spending on generative AI solutions is set to hit $16 billion in 2023 and reach $143 billion by 2027, registering a CAGR of 73.3% over the 2023-2027 period.
Here, we have focused on tech stocks like Microsoft, Amazon AMZN, Alphabet GOOGL, Adobe ADBE and Meta Platforms META, which are poised to gain well in 2024 from their heavy investments in generative AI.
Year-to-Date Performance
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Microsoft, which has gained 56.8% on a year-to-date basis, is being propelled by the success of ChatGPT. It is continuously making significant strides by integrating OpenAI’s latest LLM, GPT-4, into its Bing search engine and Edge browser. Additionally, Microsoft Azure provides the Azure OpenAI Service, facilitating the seamless application of LLMs and generative AI techniques across various applications.
Further, this Zacks Rank #3 (Hold) company recently announced OpenAI’s DALL-E 3 AI image-synthesis model, fully integrated with ChatGPT, which challenges previous models by rendering images with complex descriptions and handling in-image text generation.
Additionally, the launch of enterprise capabilities of Azure OpenAI and Copilots across Microsoft 365, Dynamics 365 and Power Platform is expected to be a game changer.
The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $242.31 billion, indicating 14.3% growth from fiscal 2023. The consensus estimate for fiscal 2024 earnings stands at $11.13 per share, up 13.5% from the year-ago actual figure.
Amazon, which currently sports a Zacks Rank #1 (Strong Buy), is leaving no stone unturned to bolster its generative AI capabilities. It recently announced the general availability of its fully managed service called Amazon Bedrock, which provides seamless access to high-performing foundation models (“FM”) from AI companies through an API.
The company also made the Amazon Titan Embeddings model generally available. It added Meta’s Llama 2 to Amazon Bedrock as a new model, which will be available through API. You can see the complete list of today’s Zacks #1 Rank stocks here.
The e-commerce giant’s investment plans in Anthropic remain noteworthy. Amazon will invest $4 billion to acquire a minority stake in Anthropic. This investment will allow AWS to provide access to Anthropic’s future FMs to its customers. These FMs will be available through Amazon Bedrock.
Further, it recently extended its partnership with NVIDIA to offer NVIDIA GH200 Grace Hopper Superchips, and host NVIDIA DGX Cloud on Amazon Web Services (AWS) for accelerating the training of generative AI and large language models.
Notably, AMZN has gained 83.5% year to date. The Zacks Consensus Estimate for 2024 revenues is pegged at $637.05 billion, indicating 11.6% growth from 2023. The consensus estimate for 2024 earnings stands at $3.55 per share, up 32.7% from the year-ago actual figure.
Alphabet’s Google is constantly making efforts to boost its generative AI offerings. It recently introduced its new, advanced and powerful large language model, namely Gemini, which is available in three different sizes: Gemini Ultra, the largest and most capable one; Gemini Pro, designed to offer scalability across various applications; and Gemini Nano, which is designed for specific tasks and mobile devices.
Further, Google Cloud announced the general availability of its suite of AI-powered assistance tools for code completion and generation called Duet AI for Developers, which provides developers with real-time code suggestions, chat assistance and enterprise-focused customization.
The company is also witnessing strong momentum with Bard, which responds to complicated or open-ended questions in the form of chats and can handle follow-up questions in a conversational manner.
Notably, Alphabet carries a Zacks Rank #3 at present. It has gained 53.9% year to date. The Zacks Consensus Estimate for 2024 revenues is pegged at $283.25 billion, indicating 11.2% growth from 2023. The consensus estimate for 2024 earnings stands at $6.66 per share, up 15.8% from the year-ago actual figure.
Adobe, which has returned 78% year to date, is also gaining well on its growing generative AI efforts. This Zacks Rank #3 company recently announced the commercial release of its family of creative, generative AI models, Firefly.
Adobe Firefly supports text prompts in over 100 languages, helps creators make several changes to their content, creates endless variations seamlessly and bolsters image generation capabilities.
Further, it enables content creators to use their words, images, audio, vectors, videos and 3D. Also, Firefly allows creators to use their creative ingredients like brushes, color gradients and video transformations.
The company is gaining strong momentum among content creators with Firefly. The Zacks Consensus Estimate for fiscal 2024 revenues is pegged at $21.41 billion, indicating 10.3% growth from fiscal 2023. The consensus estimate for fiscal 2024 earnings stands at $18.03 per share, up 12.2% from the year-ago actual figure.
Meta Platforms has gained 186.4% on a year-to-date basis. This Zacks Rank #3 company forayed into the space of LLMs with its state-of-the-art foundational language model known as Large Language Model Meta AI (“Llama”).
In collaboration with Microsoft, Meta unveiled the next generation of Llama, called Llama 2. The social media giant also released Code Llama, an LLM that can use text prompts to generate and discuss code.
The Zacks Consensus Estimate for 2024 revenues is pegged at $151.33 billion, indicating 13.4% growth from 2023. The consensus estimate for 2024 earnings stands at $17.57 per share, up 22.7% from the year-ago actual figure.
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Original: MSFT Feed: 5 Generative AI Stocks That Could be Worth Watching in 2024