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Generative artificial intelligence is the financial markets story of the year, as it has significantly changed the valuations of many companies. And while semiconductors and certain areas of software have gotten much of the attention, Oppenheimer thinks it could be "the nexus" for almost every industry over the next several years.
In a thematic research note, the investment firm said that while generative AI is the "shiny new thing," it shows that creativity is no longer something that is "uniquely human."
"The addressable opportunity for generative AI is massive with potentially positive implications for the broader economy," the research firm wrote.
Generative AI is likely to unfold in three waves, the firm continued, in infrastructure, software and then moving to end-markets in various industries. The first two markets — infrastructure and software — have garnered significant attention, due in part to Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT), as well as others like AMD (AMD), Adobe (ADBE) and ServiceNow (NOW).
For end markets, coders and marketing departments have already integrated generative AI, but other departments have not really integrated that just yet. Oppenheimer believes that major consulting firms will change that, aided by $10B in previously announced investments to help their clients use the technology.
Here are the firm's 10 predictions for how generative AI plays out over the next several years.
A second wave of AI beneficiaries
Beyond infrastructure names, Oppenheimer thinks companies such as Autodesk (ADSK), Bentley Systems (BSY), Cloudflare (NET), Shopify (SHOP), Amazon (NASDAQ:AMZN), Snowflake (NYSE:SNOW), Moody's (MCO) and PTC (PTC) could all benefit from generative AI.
Coding, content creation and customers
Generative AI is also helping companies such as Microsoft (MSFT) via GitHub, Copilot and ChatGPT, but others will take advantage of its ability to help with coding as well, including Amazon (AMZN), via CodeWhisperer and ServiceNow (NOW), with its Assist service.
For those in the content creation space, Adobe (ADBE) should benefit thanks to Firefly, while Shopify (SHOP) should take advantage of its Sidekick service.
In the customer service space, Salesforce (CRM) and Freshworks (FRSH) should benefit thanks to Genie and Freddy AI, respectively.
Other companies that could benefit include Braze (BRZE), Guidewire Software (GWRE), ANSYS (ANSS) and Veeva Systems (VEEV), Oppenheimer said.
Analytics, data, security and infrastructure software
Companies expected to benefit in these areas include Snowflake (SNOW), the data warehousing giant, along with cybersecurity firms CrowdStrike (CRWD) and Palo Alto Networks (PANW).
AI for industry
Oppenheimer thinks AI will be more prevalent in industrial applications in 2024 and the build environment will be a "major investment theme." Companies that are exposed to the theme include Bentley Systems (BSY) via infrastructure language, while Rockwell Automation (ROK) and Waste Management (WM) are exposed via industrial automation and recycling automation, respectively.
AI is "everywhere"
With AI likely to be "everywhere" in tech, namely at the edge and on devices, Oppenheimer thinks other companies besides Nvidia (NVDA) will benefit in the semiconductor space.
These include Broadcom (AVGO) and Marvell Technology (MRVL) via networking and connectivity, while Monolithic Power Systems (MPWR) should benefit from power.
Laggards narrow the gap
Infrastructure companies that have lagged, including Cogent Communications Holdings (CCOI) and Equinix (EQIX) should begin to narrow the valuation gap next year, Oppenheimer predicted.
New products and capabilities emerge
With generative AI coming to the edge, there's a chance that new product categories and capabilities begin to emerge next year, with companies avoiding competition from the incumbents in the space. The firm noted that large language models, virtual video, opportunities in machine learning, property technology, human process automation and enterprise search should see new levels of investment.
Costs decline
Oppenheimer thinks the cost of running generative AI models should continue to decline as "companies will likely shrink the data sets that models run on based on what most consumers need and as innovations reduce the cost of computing."
This should benefit Google (GOOG) (GOOGL), Meta Platforms (META), Amazon (AMZN), Microsoft (MSFT), along with many private companies.
Biotech may take a while
Generative AI will likely make an impact in the biotech world, but it will "take time to develop," Oppenheimer predicted. Companies like Moderna (MRNA) and Simulations Plus (SLP) are exposed to generative AI.
Recruiting, learning and robotics process automation
Oppenheimer thinks areas such as Recruiting, learning and robotics process automation are likely to face "structural pressure" from AI. And companies such as Chegg (CHGG), Skillsoft (SKIL) and UiPath (PATH) are likely to see some benefit from generative AI.
More on AI's impact
- Nvidia Shares Now Look Cheap (Rating Upgrade)
- Snowflake's Data Marketplace: The Key To Unlocking The Potential Of Generative AI
- Microsoft Corporation (MSFT) Presents at Barclays Global Technology Conference (Transcript)
- FTC, CMA make preliminary inquiries into Microsoft-OpenAI partnership (update)
- Elon Musk's xAI starts to roll out Grok generative AI chatbot to some X users