Published on December 10, 2023, 10:09 am
Generative artificial intelligence (AI) has emerged as a transformative force in the financial markets, leading to significant changes in the valuations of many companies. While semiconductors and certain software sectors have received much attention, Oppenheimer believes that generative AI could become the foundation for numerous industries in the coming years.
In a recent research note, Oppenheimer highlights that generative AI represents a departure from traditional notions of creativity being exclusively human. It recognizes the massive addressable opportunity for generative AI and its potential positive implications for the broader economy.
According to Oppenheimer, the advancements in generative AI are likely to occur in three waves: infrastructure, software, and end-markets across various industries. The initial two waves have already gained significant traction due to companies like Nvidia, Microsoft, AMD, Adobe, and ServiceNow. However, while coders and marketing departments have integrated generative AI into their operations, other departments are yet to fully embrace this technology. Oppenheimer predicts that major consulting firms will catalyze widespread adoption with the help of $10 billion in previously announced investments.
Oppenheimer presents ten predictions for how generative AI will evolve over the next several years. Apart from infrastructure-related firms, they identify companies such as Autodesk, Bentley Systems, Cloudflare, Shopify, Amazon, Snowflake Moody’s, and PTC as potential beneficiaries of generative AI.
Generative AI is also expected to aid companies like Microsoft via GitHub’s Copilot and ChatGPT and Amazon through CodeWhisperer. ServiceNow can leverage its Assist service for coding purposes as well. In content creation space, Adobe’s Firefly is predicted to benefit while Shopify can take advantage of its Sidekick service.
For customer service applications Salesforce (via Genie), Freshworks (via Freddy AI), Braze, Guidewire Software ANSYS and Veeva Systems have opportunities for leveraging generative AI.
In addition, companies like Snowflake, CrowdStrike, and Palo Alto Networks are expected to benefit in areas related to data warehousing and cybersecurity, respectively.
Oppenheimer anticipates that industrial applications will see more AI integration by 2024. Individuals with exposure to this theme include Bentley Systems (infrastructure language), Rockwell Automation (industrial automation), and Waste Management (recycling automation).
Furthermore, Oppenheimer suggests that besides Nvidia, other semiconductor companies like Broadcom and Marvell Technology could also benefit through networking and connectivity. Power solutions provider Monolithic Power Systems is also forecasted to experience gains.
Infrastructure companies that have previously lagged behind, such as Cogent Communications Holdings and Equinix, are likely to narrow the valuation gap next year.
As generative AI expands its presence at the edge of technology devices, Oppenheimer expects the emergence of new product categories and capabilities. Large language models, virtual video, machine learning opportunities, property technology (PropTech), human process automation (HPA) and enterprise search are among the areas primed for increased investment.
Regarding costs associated with running generative AI models, Oppenheimer predicts a decline due to companies scaling down datasets based on consumer requirements and ongoing innovations in computing technology. This reduction in costs would potentially benefit major players like Google, Meta Platforms (formerly Facebook), Amazon, Microsoft alongside numerous private entities.
While generative AI holds promise in the biotech sector, Oppenheimer cautions that development may take some time. Companies such as Moderna and Simulations Plus currently possess exposure to generative AI.
Lastly, various fields including recruiting, learning management systems (LMS), and robotics process automation (RPA) are likely to face structural changes driven by AI advancements. Companies like Chegg, Skillsoft, and UiPath may witness significant benefits from utilization of generative AI technologies.
Generative artificial intelligence is poised to shape diverse industries moving forward as its potential applications continue to expand. Oppenheimer’s research provides valuable insights into the companies and sectors that are well-positioned to capitalize on this transformative technology.