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Artificial intelligence has captivated Wall Street in 2023. The emergence of OpenAI’s large-language model ChatGPT has spurred investor excitement over AI, helping stocks with direct or perceived exposure to AI soar. In fact, Jefferies Equity Research went so far as to label the current economic backdrop underpinning markets as “the age of AI” in a recent report. AI stocks led the stock market in the first half of the year, with leading AI chipmaker Nvidia touching a $1 trillion market capitalization in May. Intel and Microsoft have also skyrocketed this year, with gains of roughly 25% and 39%, respectively. “While full integration of generative AI may be at least several years away, the concept has entered the public zeitgeist and management teams across every type of company have begun to articulate ways AI could be implemented,” the Jefferies note said. The Wall Street bank added that while significant headwinds like data privacy and intellectual property remain to be solved in connection to AI, artificial intelligence still has “significant transformative potential” that touches all corners of the market. With that in mind, Jefferies analysts searched for stocks and industries that are poised to benefit from the wave of artificial intelligence entering corporate computation. Nvidia ‘s inclusion on the Jefferies list isn’t a surprise. Analyst Mark Lipacis sees the company as a direct beneficiary of the AI boom, and rates the stock as a buy with a $500 per share price target. The forecast implies about 22% upside from Wednesday’s close. “Mark continues to view Nvidia as the greatest beneficiary of the AI inflection given that its full stack hardware and software system solution continues to be the ecosystem of choice for AI workloads,” the note said. NVDA YTD mountain Nvidia stock has added more than 180% so far in 2023. Google-parent Alphabet has also been a big beneficiary of the AI boom this year. The company announced its own large-language model, Bard , shortly after the launch of ChatGPT last November. Jefferies maintains a buy rating on Alphabet stock with a $150 per share price target, or about 25% upside from Wednesday’s $120.18 close. Jefferies analyst Brent Thill says Alphabet “will be a leader in the consumer AI opportunity” given that it has already developed more than one large language model (LLM) to help improve its array of products. While Alphabet has dragged its feet releasing its suite of LLM’s to the public to limit “reputational risk,” Jefferies says the company has so far “presented a much more coherent message about its generative AI strategy, with updates reaching across both consumer and business uses cases.” GOOGL YTD mountain Alphabet stock has climbed more than 34% so far this year. Jefferies’ research also highlights indirect AI beneficiaries, such as oil producer Chevron . The bank says that AI could help the energy sector “optimize exploration, designs, production and recovery rates.” Chevron is already planning to use artificial intelligence to “detect and prevent emissions and also make timely repairs,” Jefferies says. Energy analysts at the firm led by Lloyd Byrne have a hold rating on Chevron with a $175 per share price target, which implies nearly 13% upside from Wednesday’s $154.92 close. CVX YTD mountain Chevron stock has slipped more than 13% since January. Jefferies thinks buy-rated Meta Platforms is the leading AI beneficiary in social media. The bank has a $280 per share price target on the Facebook parent, or about 2% below Wednesday’s $285.29 close. Analyst Brent Thill “believes META is best positioned to take advantage of the AI opportunity vs. social peers TikTok and Snap,” the Jefferies report said. “He notes that a majority of these AI investments are focused on [Instagram] Reels, WhatsApp & Messenger, which reflect huge go-forward monetization opportunities that are not yet fully reflected in the stock price.” META YTD mountain Meta Platforms has climbed more than 134% so far this year.
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