The concept of artificial intelligence (AI) has been around for the past 50 years, but many Wall Street analysts now feel that we have come to a turning point with the applications and adoptions. The availability of big data, super-high-powered computer capability and advanced algorithms are all making AI faster, and perhaps most importantly, cheaper to implement.
A new and exhaustive JPMorgan research report does a deep dive into AI and shows how it will benefit some of the stocks that the firm covers. Here is their explanation of what AI actually is:
In simple terms, artificial intelligence is the simulation of human intelligence by machines. AI is different from traditional software programs in that it extracts knowledge from data and can alter its behavior (or learns) without being specifically programmed. Traditional software pre-defines the logic, whereas AI discovers the patterns and logic. These ‘self-learning’ systems are impacting nearly every industry Vertical from manufacturing to financial services, giving rise to new business models While making some legacy models obsolete.
The JPMorgan report has a list of companies the firm covers that look to benefit from AI. We screened for the stocks rated Overweight and found four for aggressive accounts to consider.
Adobe Systems
This high-profile old-school software company has been posting outstanding earnings. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content. The other segments are Digital Marketing and Print and Publishing.
Adobe is also reasonably safe route for investors looking to own a company with marketing automation product, which has become huge. Adobe also a partnership with Microsoft, which Jefferies feels is expanding, and it also has Facebook and Google as partners in the ad cloud.
The analysts see the company benefiting from AI in AI platform, predictive analytics, automation bots, speech recognition and natural language processing (NLP) and image recognition.
The JPMorgan price target for the shares is $185, and the Wall Street consensus target is $183. The stock closed Tuesday at $185.40 a share.
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Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
The search leader also pounded earnings estimates when it delivered upside to revenue, margins and GAAP earnings per share. Website ex-currency growth acceleration was a key positive. While higher distribution traffic acquisition costs rate increase could temper enthusiasm, top analysts feel the profit growth trajectory intact.
The analysts see the company benefiting from AI through search, cloud, home assistants, autonomous vehicles, photos, news feed and numerous other applications.
JPMorgan has a $1,200 price target, which compares with the consensus price objective of $1,173. Shares closed Tuesday at $1063.29.
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Cognizant Technologies Solutions
This top stock sold off recently and is offering investors the best entry point in some time. Cognizant Technologies Solutions Corp. (NASDAQ: CTSH) provides information technology (IT), operations and technology consulting, infrastructure and business process services worldwide. The company operates through four segments: Financial Services, Healthcare, Manufacturing/Retail/Logistics, and Other.
They company’s consulting and technology services include strategy consulting, business and operations consulting, technology strategy and change management, and program management consulting services; application design and development; systems integration; and application testing, consulting and engineering services; as well as enterprise information management services.
The analysts see Cognizant benefiting through AI platform, analytics/data discovery, chatbots, natural language, computer vision, advisory and implementation.
Investors receive a 0.83% dividend. The $84 JPMorgan price target compares with the consensus estimate of $82.73. Shares closed Tuesday at $72.87.
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Microsoft
This top old-school technology stock has posted all-time highs this year and has a massive $121.79 billion sitting on the balance sheet. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers, who have added the software giant to their holdings at an increasingly faster pace all of this year and last.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. Analysts also maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in the recent report.
Microsoft also reported a very strong fiscal first quarter, and the JPMorgan sees the company benefiting from AI through an AI platform, predictive analytics, automation bots, speech recognition and NLP and image recognition.
Microsoft shareholders receive a 2.0% dividend. JPMorgan has a $78 price target, which should be going much higher as the consensus price objective for the software giant is $91.72. Shares closed Tuesday at $84.88.
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While not in the JPMorgan report, other top tech companies are pressing ahead with AI advancements. NVIDIA Inc. (NASDAQ: NVDA) recently announced it will deepen its 10-year partnership to bring the most sophisticated artificial intelligence (AI) to General Electric Healthcare’s 500,000 imaging devices globally and accelerate the speed at which health care data can be processed.
Earlier this fall Tesla Inc. (NASDAQ: TSLA) announced it is working with AMD to develop its own AI chip for self-driving cars. Analysts are increasingly more bullish on AMD’s technology and potential in the critical AI market following the news, and some feel that the Tesla/AMD move has disruptive implications to the multibillion-dollar self-driving market.
While the AI technology of today probably will be laughed at as primitive 20 years from now, it is cutting edge today, and helping companies in countless ways. The large tech giants with deep pockets will be able to exploit the possibilities faster than many in other industries, and they are a great way to play this game-changing new path.
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