28 Dec Raymond James breaks down its top AI picks for 2024
Mega-cap technology titans are racing to develop generative artificial intelligence technology, and Raymond James thinks just a few key names will win, as they continue to influence the next phase towards commercialization. “Despite clear market optimism, we actually think GenAI is still in the early innings,” analyst Josh Beck said in a December note. “We see GenAI developing into an embedded OS that may span nearly every consumer and business platform, providing an intelligent agent (aka copilot) to assist with everything from writing a business contract, organizing a trip with friends or providing in-depth accurate insights on a highly nuanced topic (like investing).” This year, new discoveries in generative AI and the ensuing hype around AI-related companies propelled the broader market. This phenomenon also led several technology names to boast significantly outsized returns against it. The Nasdaq-100 , which contains many of these names within the Nasdaq Composite , jumped 54.6% this year while the S & P 500 gained 24.5%. The firm noted that adoption of generative AI is scaling at roughly 40 times the pace of other major tech platforms, and that venture capitalists have piled about $40 billion into generative AI startups. Raymond James shared some of its top stocks that already have outsized influence in generative AI, and are best-positioned to capitalize on the software stack. Here are the included names: Beck selected Amazon as the firm’s top pick, saying the e-commerce giant is no longer a “GenAI laggard.” According to the analyst, Amazon’s most recent re: Invent conference “represented a major breakout” in AI-related advancements, such as Amazon Web Services’ Neuron platform, cloud based machine-learning platform Amazon SageMaker as well as Amazon Bedrock, which makes foundation models , or FMs, from Amazon and leading AI startups available through an API. The company’s generative AI-powered assistant Amazon Q and Amazon Connect, an omnichannel cloud contact center, are a couple other tailwinds for the company. Together, these advancements “could gain meaningful adoption” among more than 1 million AWS customers, Beck said. Shares of Amazon have jumped more than 82% this year. Analysts have a consensus price target of $177.14, which represents 15% upside from here. Another one of Beck’s favorites is Meta . He’s bullish on how generative AI can advance Meta-owned Facebook and Instagram, adding that it’s already producing a 6% to 7% engagement lift across both social media platforms. “We see this more as a multi-year tailwind (i.e., not 1-time) across platform surfaces that should contribute to sustained secular growth and ad share gains,” Beck wrote. He added that the AI technology could perhaps transform messaging and the way that consumers experience the apps. Meta’s stock price has ballooned about 196% this year. Google and Microsoft are other well-positioned names in the race to adopt and commercialize generative AI, the analyst noted. Shares of both companies have gained more than 55% this year. While Google still has more to prove, next year is an opportunity for the tech giant to scale its AI model, Gemini. Gemini 1.0, the company’s first version, offers three different sizes, ranging from Ultra for highly complex tasks to Nano for mobile devices. Ultra could help attract developers and new cloud customers, Beck said. Microsoft, meanwhile, is already a success story given its early investment into ChatGPT-maker OpenAI as well as its other products in the generative AI tech stack, such as development hub Azure AI Studio. “We remain positive on Microsoft’s position in the AI landscape given their track record of significant, timely innovation paired with their long-standing Enterprise relationships, giving them natural entry points into IT buyers,” analyst Andrew Marok, who covers the stock, wrote in the note. Within the stack, Raymond James also highlighted private companies that have received significant VC investment. Revenue platform Clari, design platforms Canva and Picsart, and AI application platform Anyscale were among several mentioned in the note.