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Here is your weekly analyst Pro Recap in the area of artificial intelligence (AI) for this week. Get all this news and more in real-time with InvestingPro.
1) Apple is now seen as the major AI beneficiary
Morgan Stanley analysts released a note this week. They argue that 2024 will be a catalyst year for ‘Edge AI’ – a dominant market theme that will benefit certain companies, including Apple Inc (NASDAQ:AAPL).
“We see Edge AI as a multi-year tailwind that can improve Product and Services monetization and drive Apple's user base LTV higher, a key driver of long-term valuation, supporting our Overweight rating,” the analysts wrote in a note to clients.
The analysts argue that Apple will emerge as an Edge AI enabler because of 3 “distinct advantages” – Data, Privacy, and Vertical Integration.
Elsewhere, the other 5 stocks that are mentioned as AI ‘enablers’ are Dell (NASDAQ: NYSE:DELL), MediaTek Inc (OTC:MDTKF) Qualcomm (NASDAQ: NASDAQ:QCOM), Xiaomi (OTC:XIACF), and STMicroelectronics NV ADR (NYSE:STM).
2) Adobe is a new Top AI Pick at Piper Sandler
Piper Sandler analysts named Adobe Systems Incorporated (NASDAQ:ADBE) the broker’s highest conviction idea to own into year-end, alongside Microsoft (NASDAQ: NASDAQ:MSFT).
"October data reinforces our bullish view that new generative AI functions integrated directly into the application layer could better position ADBE to sustain growth despite a challenging macro," Piper Sandler analysts commented.
"Creative Cloud mobile downloads increased 19% y/y during the month of October (vs. 6% last year) while Acrobat mobile downloads increased 18% y/y (vs. 7% last year)."
Piper has an Overweight rating and a $650 per share price target on ADBE stock.
“We suggest growth investors revisit ADBE and see the potential for another run into year-end on further proof points that AI could help sustain a recovery. MSFT and now ADBE are our highest conviction ideas to own into year-end."
3) Microsoft’s ‘iPhone Moment’ Thesis Confirmed
Microsoft Corporation (NASDAQ:MSFT)-backed OpenAI’s first developer conference marked a significant stride toward becoming a platform company. Oppenheimer analysts attended the event and highlighted the announcement for a 75% price reduction, dropping the cost of GPT-4 LLM to $0.03 from $0.12 per 1K completion tokens.
This positions OpenAI's model as a foundational building block or "operating system" for AI development, akin to Windows, iOS, and Android in their respective domains.
“OpenAI further extended its "app store" beyond the popular plug-ins to userbuilt custom ChatGPTs, which can be resold in a "GPT Store," creating a hard-to catch virtuous network effect,” analysts wrote.