Analysts outlined the next phases of the AI stock craze, with eyes on Amazon, Microsoft, Meta, and more
The AI investing craze has continued to heat up in 2024. AI chip maker Nvidia $NVDA’s stock alone is up 77% since of the start of the year. While some Wall Street analysts warn that the AI frenzy is a “bubble within a bubble,” others argue that the big tech stocks are actually undervalued.
Analysts at Goldman Sachs $GS, led by Ryan Hammond, said in a new note that AI stocks still have room to grow — and that Goldman analysts are already starting to see which companies will benefit from the AI boom next.
“In addition to NVDA [Nvidia], investors have been focused on a broadening of the AI trade,” Hammond wrote in a note to investors late last week. “We expect there will likely be three broad, subsequent stages of the AI trade.”
The Goldman analysts say Phase One of the growing AI trade was primarily focused on the chip maker Nvidia. Phase Two will consist of companies outside Nvidia that are involved in the building AI infrastructure like semiconductor makers, cloud providers, data centers, hardware makers, and utilities.
An equal-weighted basket made up of Phase Two stocks has already surged 14% over the last six months, Goldman says.
Goldman says Phase Three will see the rise of stocks in companies that make revenue generating, AI-enabled software and products. Prominent companies named by Goldman Sachs in this category include Facebook $META parent Meta, Adobe $ADBE, Intuit $INTU, Uber $UBER, and Salesforce $CRM.
Phase Three stocks are up 21% over the last six months, according to Goldman Sachs.
Finally, in Phase Four investors will focus on companies whose productivity has increased due to the adoption of AI technology, Goldman says. The sectors most likely to benefit from the adoption of AI are software and services, as well as commercial and professional services, according to Goldman. Healthcare, financial services, and insurance will also benefit.
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