As the second quarter begins, we’re taking a look at the current state of the AI industry. Returns for 2024 are strong, but we think there is still room for growth. There are two reasons behind our belief. For one, the adoption of artificial intelligence is still in its infancy, with companies still researching and understanding the potential use cases for AI and how they can leverage it to generate revenue. Jefferies said this week that 2024 is the year of transition from “dreaming of the possibilities of artificial intelligence” in 2023 to implementation and monetization this year, with an eye toward new product development starting in earnest in 2025. Stated. Analysts said of Microsoft and Amazon. is perfectly positioned for enterprise adoption, and the Meta platform and Alphabet are uniquely tailored to meet consumer needs. In their view, Microsoft is the clear leader, thanks to its investment in ChatGPT startup OpenAI, given its positioning on the infrastructure side with Azure cloud and its early move to product offerings with its Copilot AI assistant. You can Meanwhile, Alphabet has been designated as “Most Undervalued” by analysts at Jefferies, a designation we agree with despite the decision to shed some shares Monday morning. . Microsoft leads generation There’s no denying Microsoft’s execution in paving the way for AI to become mainstream and the company to profit from the emerging technology. It was unparalleled. Microsoft was quick to realize the power of OpenAI and made an initial investment in 2019, followed by investments in 2021 and 2023. His ChatGPT on OpenAI was launched in late 2022 and quickly went viral, starting the current wave of investor interest in companies that benefit from AI and its stocks. MSFT 5Y Mountain Microsoft is 5 years away Google is not leaving As for Alphabet, there are still concerns about the company’s ability to maintain its search dominance and management’s ability to operate efficiently after a series of missteps. Understandably, there is some skepticism about its ability to lead the industry. love. But we think it’s wrong to exclude Google’s parents. Alphabet may have made a huge mistake by allowing Microsoft to take the leap in generative AI, but the company has years of experience in artificial intelligence research. Much of what we see today with products like Google’s Gemini and ChatGPT would not have been possible without the research Alphabet has conducted over the past decade. In fact, the Transformer architecture on which ChatGPT is built was developed by researchers at Google and introduced in 2017. Google is also moving rapidly to the cloud and has a trove of consumer data that could prove important for improving its models and his AI products. over time. Given that the GOOGL 5Y Mountain Alphabet 5Y stock price has rebounded about 15% since his early March bottom, some had to let go. But he thinks it would be a mistake to eliminate all exposures below 23x projected 2024 earnings, especially given the combination of data, talent and financial strength Alphabet has at its disposal. Hence, our decision to maintain 545 shares of Alphabet after adjustment, communicated in Monday morning trading. The stock hit a 52-week high on the first day of April. You should also be aware of the recent news that Apple may be looking to use Google as a partner in its own AI ambitions. Apple has certainly been implementing artificial intelligence into its products for years, but it has yet to announce any major updates regarding its work with new forms of generative AI. The partnership with Alphabet will definitely be a plus for both companies. It remains to be seen whether they decide to partner with Alphabet or continue development in-house, but when Apple hosts its annual Worldwide Developers Conference in June I hope to hear something about AI. Alphabet’s Gemini Nano seems like a viable option for Apple, considering it’s designed to be used for on-device tasks. This means it doesn’t rely on sending data back to the cloud. This is a data processing practice that Apple has used in the past. User Privacy. For example, Apple says, “Face ID data never leaves your device and is never backed up to iCloud or anywhere else.” That’s different from Siri. These queries are sent back to the cloud and rendered fairly seamlessly on the device. This is why Face ID works without a mobile or internet connection, but Siri doesn’t. Looking to Amazon to hedge its bets, the latest update on the company’s AI ambitions was last week’s announcement of his $2.75 billion investment in AI startup Anthropic, which is expected to expand into e-commerce and cloud It is the largest investment ever by a major computing company. This alone goes to show how big these companies are betting that generative AI will actually be as revolutionary as smartphones and the internet itself. Back in September, Amazon spent $1.25 billion on Anthropic, bringing the total to $4 billion. Anthropic is the company behind the highly acclaimed Claude Large Language Model (LLM). The latest version of Claude 3 “outperformed OpenAI’s GPT-4 and Google’s Gemini Ultra on industry benchmark tests including undergraduate level knowledge, graduate level reasoning, and basic mathematics,” the CNBC technology team reported. . Notably, Amazon is not relying on Anthropic for its generative AI ambitions; if anything, this investment diversifies its bet on its own LLM (codenamed Olympus), which is set to debut later this year. It seems like a way to reduce or avoid risk. The combination of cost optimization on the e-commerce side, the resurgence of cloud spending in IT budgets, and the potential for new revenue streams from generative AI suggests further upside ahead. This is highlighted by what Amazon is doing to increase streaming revenue in the form of expanded ad support for Prime Video and sports rights, as well as by the recent announcement of same-day delivery of medicines for common conditions. There is no need to mention our expansion into the care field. . AMZN 5Y Mountain Amazon 5 Years Amazon is the most expensive of the megacaps at 43x 2024 earnings. Amazon has never been “undervalued” based on its earnings, but its current valuation is a fairly steep discount compared to its five-year average of 62 times. Looking at the 2025 earnings forecast, Amazon’s valuation drops by 33 times. Jefferies analysts have criticized Amazon’s position within the company, but given the company’s public cloud leadership, this request is understandable. However, given the company’s dominance in e-commerce and all the data it can collect from consumers’ shopping habits, it should be recognized that the company presents a huge opportunity for consumers when it comes to implementing generative AI. Amazon stock hit a 52-week high on the first day of April. Meta leverages its strengths The Meta platform serves as consumer AI. The company has focused on cutting costs as much as possible and investing in AI when necessary, which has resulted in significant results for the stock price. In addition to increasing user engagement, the implementation of AI also improves return on investment (ROI) for advertisers. Additionally, Meta’s decision to open source the LLaMa model should help implement new tools in the long run. While it may not be as obvious or direct as monetization at Microsoft, Meta Platforms is reaping financial benefits from its AI efforts. META 5Y Mountain Meta Platform 5 Year At just over 24x projected 2024 revenue, Meta has the ability to drive best-in-class advertiser ROI and management’s focus on cost containment. We believe there is plenty of room for growth. As for TikTok, we think Meta has a chance to win no matter what happens with the Chinese-owned short video platform in the US market, but if it reduces ByteDance’s use of TikTok, Facebook and Instagram’s Reels This will directly increase engagement. This is especially true in an election year. Despite the issues politicians may or may not have with Meta’s suite of apps, the service remains the best way to reach potential voters. (Jim Cramer’s charitable trusts are long MSFT, GOOGL, AMZN, AAPL, META. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, Jim Receive trade alerts before making a trade. trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in a charitable trust’s portfolio. If Jim talks about a stock on his CNBC TV, he will wait 72 hours before executing the trade after issuing a trade alert. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
Morning traffic outside Meta headquarters in Mountain View, California, USA on November 9, 2022.
Peter DaSilva | Reuters
As the second quarter begins, we’re taking a look at the current state of the AI industry. Although returns for 2024 are strong, we believe there is still room for growth. There are two reasons behind our belief. For one, the adoption of artificial intelligence is still in its infancy, with companies still researching and understanding the potential use cases for AI and how they can leverage it to monetize.
