Investing.com – Here are analysts’ top moves in artificial intelligence (AI) this week.
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Microsoft ‘may own the most valuable AI real estate’ – analyst
Microsoft (NASDAQ:) was reiterated as a buy at Melius Research earlier this week as the company’s analysts believe the tech titan “may own the most valuable AI real estate.”
“When you look at the adoption of ‘Copilots’ (Microsoft’s various generative AI productivity tools), it’s not a question of revenue at this time,” Melius analysts noted.
“The initiative is actually about creating the new computing interface for artificial intelligence. About 200 million users are eligible for Copilot today – and if many of Microsoft’s 80 million consumers and more than 400 million knowledge workers eventually use Copilot to start and end a day, Microsoft will win big.”
The goal of Microsoft’s strategy is to centralize AI tools within Copilot, according to Melius analysts, who believe it’s an approach that will allow the company to capture significant value and expand its Total Addressable Market (TAM) in the diverse software industry.
Evercore: “We continue to think Apple will be an AI winner”
Despite being a clear laggard in terms of AI, analysts at Evercore ISI remain optimistic about Apple’s prospects in a fast-growing industry, maintaining an Outperform rating and a $220 price target for the company this week.
The rally is partly due to a new paper published by Apple (NASDAQ:) researchers, which introduces ReALM (Reference Revolution As Language Modeling), showcasing the company’s latest progress in AI innovation.
“Apple indicated that its smaller ReALM models performed similarly to GPT-4 with fewer parameters, making it better suited to providing AI on the device than the more typical approach of managing all the AI features in the data center cloud,” Evercore analysts said .
“Apple’s larger ReALM models are reportedly capable of outperforming GPT-4,” they added.
The company emphasized that ReALM aims to enhance Siri by improving its ability to understand both the data on the screen and the context of conversations.
“We continue to think Apple becomes an AI winner when it solves on-device inference in a way that enables a new iPhone Supercycle,” Evercore said. “This feels like a step in that direction and confirmation that Apple is focused on cutting-edge artificial intelligence.”
Jefferies names his top pick for the AI winner
Analysts at Jefferies said in this week’s note to clients that there has been a shift in the generative AI landscape.
In particular, analysts said that 2023 was mostly about the possibilities and potential of this burgeoning technology, whereas now, as we progress through 2024, the emphasis is shifting towards making concrete progress.
The investment bank noted that vendors are now refining and evaluating their AI offerings, with users identifying valuable applications for the technology.
“We believe AI spending will spread to other infrastructure providers and app providers that enable businesses to take advantage of AI,” Jefferies analysts wrote.
“Our AI KIS basket represents the companies we see making the most of this transformation opportunity. We argue that investors position themselves before corporate adoption ramps up late 24th to 25th, providing a better outlook for the revs to rise,” they added.
Against this backdrop, the company named Microsoft as the top AI winner of the current generative AI cycle as it believes the tech giant is well positioned “to take advantage of both the infrastructure (Azure OpenAI) opportunities and of apps (Copilots series), capturing opportunities much of this transformation opportunity,” they said.
Jefferies raised its price target on Microsoft shares from $465 to $550.
“It’s time to invest in the next stage of AI commerce,” says Citi
Analysts at Citi Research said earlier in the week that they believe now is the time to “capture the next leg of the AI business.”
The Wall Street giant’s team believes that investors should take a broader approach that not only extends beyond the United States but also covers the entire value chain.
They classify AI-related investments into three main categories: enablers, creators, and users.
Recently, the first two categories have been in the spotlight, attracting investor interest thanks to their impressive returns.
However, Citi is now pointing out that users and various global companies have not received the right amount of attention, suggesting potential overlooked opportunities in these areas.
“We believe investors should broaden their thematic exposure as users now contribute positively to returns and earnings growth becomes more distributed,” the analysts said in a note.
In this context, Citi has unveiled two investment baskets to help investors gain exposure to artificial intelligence.
The “Artificial Intelligence at a Reasonable Price” basket targets those seeking balanced growth and risk management, leaning towards North American creators and enablers of AI technology.
Meanwhile, the “Artificial Intelligence Value” basket targets value investors looking for AI stocks with strong business fundamentals, emphasizing companies with margin expansion potential and a significant presence in Europe.
Macquarie says the Apple-Baidu partnership will be similar to the Google-Samsung deal
Recent reports have revealed that Apple is in talks with Baidu (NASDAQ:) to equip its devices in China with generative AI capabilities.
The collaboration aims to incorporate Baidu’s Ernie Bot into future Apple products, including the iPhone 16 and upcoming versions of Mac OS and iOS 18, tailored for the Chinese consumer base.
Analysts see the move as a natural step for Apple, which continues to build on its existing relationships with search engine vendors such as Google (NASDAQ:) worldwide and Baidu in China for built-in search capabilities.
Commenting on this development, Macquarie analysts said they believe a potential AI deal between the two companies is likely to mirror the pattern of Google-Samsung deals, starting on a limited basis.
“We believe an Apple/Baidu deal will be similar to the Google/Samsung (KS:) deal as Baidu/Samsung and Apple/Google also appear to follow suit,” Macquarie wrote.
“This would involve Apple licensing versions of the AI models on the device to power new AI applications – these could include speech recognition, photo editor and Circle to Search functions with search traffic from Siri or applications routed through Baidu”.