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Microsoft Corporation (NASDAQ:MSFT) held a developer AI tour event in New York City last week and analysts were once again impressed by the company’s advance on the AI front.
For Barclays, the event was another piece of evidence that “Microsoft is a clear-cut winner in AI and has lots of runway to further monetize new and existing products.”
“[We] came away incrementally positive on the progress Microsoft is making in its AI offerings… While today’s event did not feature any new announcements, the strong developer turnout (>3,000 attendees), as well as interest in a variety of Microsoft products (both Copilot and others) demonstrated to us that Microsoft is capturing incremental mind share amongst enterprise customers,” Barclays analysts said.
Wolfe Research strategists weighed in on the most powerful stocks theme at the moment – AI. Their analysis shows that six prominent large-cap companies, poised to reap significant benefits from AI advancements, have collectively contributed +210 basis points (bps) to the S&P 500‘s year-to-date return of +268 bps.
Within the industry landscape, Semiconductors have stood out as the top-performing group. Companies positioned as major beneficiaries of AI advancements within this sector are anticipated to experience substantial additional advantages in the coming months.
“While expectations appear to be very high, our sense is that the biggest AI beneficiaries are likely to outperform until AI-related earnings expectations start to turn downward. In our view, this is unlikely to occur unless a broad-based recession starts to hit at some point in the months ahead,” strategists said in a note.
“That said, the bigger question is whether the “AI frenzy” can keep powering the overall market higher. While AI should remain a tailwind, our sense is that the overall Fed liquidity picture, the interest rate outlook, and how much the U.S. economy slows in the months ahead will be bigger drivers of overall market returns.”
Citi’s 4Q Chief Information Officer (CIO) survey results indicated a significant improvement in the IT budget landscape. Expectations for near-term IT budget growth have increased from +1.9% in the September ’23 survey to +2.8% in the December quarter, approaching the historical average of 3%.
Cybersecurity retains its position as the top investment priority for CIOs, followed by Data modernization/GenAI, Digital Transformation Projects, and Cloud Adoption. The global economic outlook appears stable to slightly improving, with upward revisions noted in trailing 3-month IT budgets. Sector-specific takeaways cover Software, European Technology, Hardware, Communication Services and Infrastructure, and IT Service.
“MSFT remains the top vendor that CIOs are considering as a GenAI partner, far ahead of GOOGL and AMZN. In terms of the breakdown of funding for GenAI projects, 64% of CIOs expect to get new/additional funding while 36% believe it will come from existing resources, with some CIOs expecting to spend less on vendors such as ORCL, IBM (NYSE:IBM) or SAP to make room for GenAI investments,” analysts wrote in a note.
Analysts at Morgan Stanley urged the broker’s clients to consider owning Samsung Electronics Co Ltd (KS:005930) shares, as the company offers “one of the best ways” to play a shift to consumer AI.
The analysts argued that AI is “going to be a growth driver for years to come.”
“We estimate double the DRAM content in AI PCs and a >50% rise in the next iteration of AI phones; along with replacement demand, this could drive 6ppt lower DRAM self-sufficiency by 2025,” wrote Morgan Stanley analysts in the note.
“The turn of the memory cycles provides a big boost to earnings estimates,” added the analysts. “Ultimately, Samsung is a very cheap way to participate in edge AI.”
New Street Research analysts raised their rating on the shares of Advanced Micro Devices Inc (NASDAQ:AMD) to Buy with a $215 per share price target.
The broker’s analysis shows upside for all names in the data center AI chip sector, with AMD and TSMC standing out at each end of the risk spectrum.
“Lisa Su, CEO of AMD, pitched late last year a target addressable market for datacenter AI chips of $400bn. Lisa is to be taken seriously; this forecast might eventually prove wrong, but it was certainly not pulled out of a hat,” the analysts said.
