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https://www.barrons.com/articles/servicenow-earnings-stock-price-ef3bea69
ServiceNow
posted better-than-expected results for its latest quarter and lifted its full-year outlook.
Microsoft Corp. easily topped profit and revenue expectations for its latest quarter, though its shares were moving more than 3% lower in extended trading Tuesday after the company discussed the year ahead.
The technology giant has won favor on Wall Street for its positioning in the artificial-intelligence revolution, though Chief Financial Officer Amy Hood said on Tuesday’s earnings call that “even with strong demand and a leadership position,” Microsoft’s
MSFT,
“growth from our AI services will be gradual.” Microsoft’s AI for its Azure cloud-computing business needs to ramp, and the company is working toward the general availability of its Copilot productivity product.
Microsoft’s AI revenue impacts will thus be weighted toward the second half of the new fiscal year that just began, she continued. Meanwhile, she expects that Microsoft’s capital expenditures will rise sequentially each quarter “as we scale to meet demand signals.”
Hood’s commentary came as Microsoft posted fiscal fourth-quarter results Tuesday afternoon that showed a 15% jump in revenue for the company’s cloud-computing segment, which it calls Intelligent Cloud. Revenue for the segment came in at $24.0 billion, while analysts had been anticipating $23.8 billion. The growth rate was 17% on a currency-neutral basis.
The company said revenue for Azure and other cloud services was up 26%, or 27% in constant currency. Microsoft’s forecast had been for 26% to 27% in constant-currency Azure sales growth, while the company posted 31% constant-currency growth on the metric in the March period. The FactSet consensus was for 27% growth in constant currency.
“While we believe the Street was hoping for Azure growth more in the ~28% range, we believe the consumption part of the business held up well,” Evercore ISI analyst Kirk Materne said in a note to clients.
For the September quarter, Microsoft anticipates 25% to 26% in constant-currency Azure growth.
The cloud migration is still in the “early innings,” Chief Executive Satya Nadella said on the call, while also highlighting a “new world of AI driving a set of new workloads.”
“We think of that, again, being pretty expansive from a TAM [total addressable market] opportunity and we’ll play it out,” he continued, though the company is also up against the “law of large numbers” given the massive scale of its cloud business.
The company generated fiscal fourth-quarter net income of $20.1 billion, or $2.69 a share, compared with $16.7 billion, or $2.23 a share, in the year-earlier period. Analysts tracked by FactSet were modeling $2.55 a share.
Overall revenue for Microsoft climbed to $56.2 billion from $51.9 billion, whereas analysts had been expecting $55.5 billion.
See also: Microsoft bulls are excited as company reveals pricing for AI offering
Microsoft logged $18.3 billion in revenue for its productivity and business processes unit, up 10% from a year before, or up 12% in constant currency. That part of the business includes LinkedIn and both commercial and consumer versions of Office. Analysts had been looking for $18.1 billion.
Revenue for the More Personal Computing segment, which includes Windows and Xbox content and services, dropped 4% to $13.9 billion and was off 3% on a constant-currency basis. The FactSet consensus was for $13.6 billion.
Nadella, meanwhile, expressed optimism about the eventual opportunities brought upon by Microsoft’s Copilot offerings.
“I do think people are going to look at how can they complement their [operating-expense] spend with essentially these Copilots in order to drive more efficiency and, quite frankly, even reduce the burden and drudgery of work on their OpEx and their people and so on,” he said.
Evercore’s Materne called the overall results “solid” amid “a lot of macro headwinds.” Microsoft’s investment story “gets stronger in [the second half of the calendar year] as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” he wrote.
Read: Amazon finally is nearing a bottom on this key measure, analyst says
Shares of big tech companies have coasted through this year on AI euphoria, but as Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. prepare to report results this week, some investors are starting to ask how much those AI advancements might actually cost.
Those questions have surfaced after several months during simply saying “AI” on earnings calls appeared to be enough for investors. If the economy sours though — as some expect in the second half of this year or next year — big tech’s AI ambitions could go with it.
“Given the exorbitant costs associated with the development, hosting and serving of AI products, many investors are concerned about the potential for [fiscal 2024] commentary regarding a material increase,” Jefferies analyst Brent Thill wrote, according to a MarketWatch earnings preview for Microsoft’s
MSFT,
results.
Microsoft and Alphabet Inc.
GOOGL,
GOOG,
which both report on Tuesday, have been in heated competition in the world of online search and digital advertisements, as Microsoft leans more on its massive investments in research lab OpenAI to muscle up its own search capabilities. But a Deutsche Bank analyst said that so far, Google appears to have the upper hand in that battle.
Still, for Microsoft, after a broader pullback in IT spending earlier this year, analysts have found more to like about its cloud-computing business — namely market-share gains, generally-sturdy demand, and whatever ways AI can fit into the equation. Wolfe Research analyst Alex Zukin, in a recent note, said he believed “the focus will turn from what is good enough, to how good can it be,” as Microsoft moves deeper into AI.
“How good can it be?” might also be a question for Meta
META,
which reports second-quarter results on Wednesday.
Shares of the social-media company have more than doubled in value so far this year. JMP analyst Andrew Boone, in a recent note, cited likely improvements in Meta’s digital ad segment, better engagement, and a broader advertising backdrop that “appears to be stable” after a slowdown in spending, Still, there are signs that the initial user attraction to Threads, Meta’s answer to Twitter, has fizzled.
For the week ahead, 166 companies in the S&P 500 index report results, including 12 from the Dow, according to FactSet. Among them are Domino’s Pizza Inc.
DPZ,
which now plans to deliver pizza via Uber Eats after years of chafing at third-party delivery apps. Industrials General Electric Co.
GE,
and 3M Co.
MMM,
also report, after 3M agreed to pay $10.3 billion to settle accusations it was responsible for so-called “forever chemicals” in drinking water.
Quick-service restaurant chains Chipotle Mexican Grill Inc.
CMG,
and McDonald’s Corp.
MCD,
also report, with BofA analysts expecting an “almost normal” quarter for the industry, after spending at chain restaurants grew last month and costs for some ingredients started to ease following two years of supply disruptions. Auto makers General Motors Co.
GM,
and Ford Motor Co.
F,
also report, and while parts shortages that have constrained vehicle production have shown signs of fading, so has electric-vehicle “euphoria.”
Visa, Mastercard: Earlier this month executives from the big banks said U.S. consumers are generally doing OK despite still-rampant inflation, although perhaps less OK than in prior months. This week credit-card giants Visa Inc. and Mastercard Inc. report results on Tuesday and Thursday, respectively. The profit, sales and credit-card volume figures from Visa
V,
and Mastercard
MA,
will offer more specifics on consumer spending, as vacations and concerts compete with more expensive and more pressing needs, like groceries and other bills.
Shares of Visa and Mastercard are up so far this year, but some analysts said there could be more room investors to step in. SVB MoffettNathanson analyst Lisa Ellis recently said shares of both companies were hovering at “unusually attractive” levels.
Mattel outlook, and anything ‘Barbie’-related: The “Barbie” movie hit theaters nationwide on Friday. And after an epic marketing campaign, Mattel Inc.’s investors, banking on the film to drive a rebound for the toy maker during the second half of this year, will be zeroed in on the box-office results following the film’s debut on Friday.
Expectations for the film are huge. And when Mattel
MAT,
reports second-quarter results on Wednesday, executives could offer the first answers to some big questions: Has the film helped revive toy sales? Sales for anything else? Will the “Barbenheimer” effect help or hurt financials?
The film — directed by Greta Gerwig, written Gerwig and Noah Baumbach, and starring Margot Robbie and Ryan Gosling — brings together two writers with indie bona fides and two actors with mainstream starpower. Reviews so far have been favorable, and Barbie is already Mattel’s most profitable franchise. But the movie isn’t directly geared toward children, movie theaters have struggled to get back on track after pandemic lockdowns, and toy demand through this year has been weak after ballooning during the pandemic. And some analysts don’t expect “Barbie” to do much for Mattel’s stock.
Emily Bary and Jon Swartz contributed reporting to this story.
JPMorgan Chase & Co., the largest U.S. bank, has been wading into artificial intelligence to a greater extent than its rivals and is now producing a series of research notes that are AI-generated.
The move represents something of a step forward in an area that’s been seen as ripe for disruption — investment research — at a time when the AI revolution is taking hold on Wall Street. At JPMorgan, AI is being used to create short summaries of human-produced reports and to link those reports inside the firm’s Cross Asset Spotlight.
Questions remain over how far machine-generated research can go in replacing humans, and regulations on it are still in the early stages — putting pressure on Wall Street banks to be completely transparent about how their research is being put together. Research reports are generally subject to rules from Finra, or the Financial Industry Regulatory Authority, which require that a qualified registered principal approves a report prior to distribution to the public. Banks may also include legal or compliance approvals as part of their process. Through a spokeswoman, JPMorgan
JPM,
declined to comment for this article.
In a disclaimer attached to JPMorgan’s Cross Asset Spotlight note, primary authors Thomas Salopek and Federico Manicardi cited the large amount of content that investors need to sift through in constantly-moving markets as part of the reason that AI is being used. Salopek and Manicardi said they can produce an AI-generated summary of the most relevant and recent analyst reports on a particular topic or event — as they did on Tuesday with a focus on earnings, China, the soft-landing scenario, and AI’s impact on U.S. interest rates.
“What seems to be going on here is that they’re using an AI-based system to build a summary publication of existing human-generated reports that are already out there,” said Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth, a multifamily office based in Miami, which oversees more than $2.5 billion and is already using AI to assist with its client conversations.
“It certainly is still relatively unusual, but I think analyst jobs are safe for now,” Wagner said in an email to MarketWatch. “It’s an interesting development that shows how AI-driven automation could impact labor markets. If relatively repetitive ‘knowledge work’ can be automated in this fashion, banks and law firms may not need as many lower-level employees as they do today.”
New York-based JPMorgan has been leading Wall Street’s shift toward AI in a number of different ways. From February through April, the bank advertised more than 3,600 jobs globally that are all related to AI, according to Bloomberg. In May, it filed a patent application for its own software, known as IndexGPT, which can be used for analyzing and selecting securities for its clients. And JPMorgan has also created a tool that scans speeches by Federal Reserve officials to detect policy shifts and potential trading signals.
WSJ: Pro Take: JPMorgan’s Fedspeak Evaluator Is Unsure About This Week’s Rate Decision
Rivals of JPMorgan haven’t gone quite as far. Representatives of BofA Securities
BAC,
Citi
C,
and Deutsche Bank
DB,
said their organizations haven’t produced any AI-generated research notes.
Goldman Sachs
GS,
has written about the economic and market impacts of AI, but hasn’t used the technology to write text for its research yet, according to economist Joseph Briggs and chief global strategist Praveen Korapaty. Morgan Stanley
MS,
declined to comment through a spokeswoman.
As of Friday afternoon, U.S. stocks
DJIA,
COMP,
were heading higher as investors prepared for a major rebalancing of the Nasdaq-100 index and the expiration of trillions of dollars of stock option contracts. Meanwhile, Treasury yields were mixed ahead of next week’s policy announcement by the Federal Reserve.
Micron Technology Inc. could be approaching a big new semiconductor cycle as it predicts a huge boost from artificial intelligence, but there could be a roadblock in the path.
Micron
MU,
reported a third-quarter loss and a 57% drop in revenue Wednesday, after the chip industry’s oversupply hit the memory-chip maker hard. On the bright side, Micron Chief Executive Sanjay Mehrotra said he believed the memory industry “had passed its trough” and that the company’s margins should improve as the supply-demand balance is gradually restored.
Another big issue for the stock right now, though, is China’s decision to recommend that “operators of critical information infrastructure in China should stop purchasing Micron products.” Mehrotra told analysts on the company’s conference call that the decision will impact about 50% of its products sold in China.
“We currently estimate that approximately half of that China-headquartered customer revenue, which equates to a low double-digit percentage of Micron’s worldwide revenue, is at risk of being impacted,” Mehrotra said on the call. “This significant headwind is impacting our outlook and slowing our recovery.”
More from Therese: AI has given a big boost to stock of this lesser-known Silicon Valley computer maker
He said Micron will work with its long-term customers who are not impacted by China’s decision, and hopefully will increase its share with those customers.
On the plus side, Micron expects to see a substantial boost to its memory business as a result of companies gearing up to run generative AI on their own servers or clouds. “Generative AI [is] becoming a big opportunity and we look at it for 2024 as a big year for AI and for memory and storage, and Micron will be well-positioned,” in the data center with its products, Mehrotra said. He added that it is “very, very early innings for AI,” which is really pervasive. “It’s everywhere.”
Full earnings coverage: Micron CEO calls bottom in memory-chip market, but weak PC, smartphone forecasts cut into expected AI gains
He said it will be in both cloud and enterprise server applications, and due to confidentiality of data, enterprises will be building their own large language models, adding that the DRAM (dynamic random access memory) content required for AI in servers is driving higher demand for memory and storage in servers. In super cluster configurations, for example, the DRAM content can be as much as 100 times higher.
Investors appeared to maintain some caution about when the AI impact will kick in, even as some analysts have forecast that AI demand will lead to a general supercycle for many hardware companies. Micron’s shares see-sawed in after-hours trading Wednesday, ending the extended session up about 3%.
See also: Will generative AI complete the cloud transition? One prominent executive thinks so.
In a note ahead of the company’s earnings, Raymond James analyst Srini Pajjuri said that the impact from China “should be short-lived given the commodity nature of Micron’s products.”
Right now, it’s too early to say how long China may be a drag for Micron, but if Mehrotra is right, investors should take heart that the company is going to be another beneficiary of the coming AI boom.
Shares of Nvidia Corp. and Advanced Micro Devices Inc. slumped in the extended session Tuesday following a report that the Biden administration is considering a new ban on sales of AI chips to China.
Nvidia shares
NVDA,
A fell 3% after hours, following a 3.1% gain to close at $418.76, while AMD shares
AMD,
also fell 3%, after a 2.7% gain in the regular session to close at $110.39.
Late Tuesday, the Wall Street Journal reported the Commerce Department could further block sales of AI chips to China unless U.S. companies first obtain a special license.
The ban would follow upon similar actions last year that threatened $400 million in Nvidia sales, but the company found a workaround in supplying a version of products that avoided the ban.
Read: AMD launches new data-center AI chips, software to go up against Nvidia and Intel
Both Nvidia and AMD have launched new AI chips this year: Nvidia in March and AMD earlier in the month. Last year’s release of Open AI’s ChatGPT generative AI — with billions of dollars invested by Microsoft Corp.
MSFT,
— resulted in an explosion of interest in artificial-intelligence technology, prompting luminaries to herald the technology as the biggest thing in tech since … you name it.
Read: Bill Gates says AI is only the second revolutionary tech advancement in his lifetime
News of the possible ban happened to follow a claim earlier in the day from Baidu Inc.
BIDU,
on the Chinese search company’s blog, which said its Ernie 3.5 version AI outperformed ChatGPT’s earlier version “in comprehensive ability scores,” and its latest iteration, GPT-4, which was released in mid-March, “in several Chinese-language capabilities.”
Baidu’s claim appeared to be based upon performance metrics published in China Science Daily. On Wall Street, ADRs of Baidu were down 0.7% after hours, following a 3.1% gain to close at $143.90.
As of Tuesday’s close, Nvidia shares were up 187% in 2023, and AMD shares were up 70% for the year.
Read: Snowflake adds partnerships with Nvidia and Microsoft for AI double play
Shares of Super Micro Computer Inc.
SMCI,
which have benefited from AI, also declined 3% after hours, while shares of Intel Corp.
INTC,
which supplies chips to data centers, saw shares decline 1% after hours.
As we enter artificial intelligence’s brave new world, humans have naturally come to fear what the future holds. Do computers like HAL from 2001: A Space Odyssey pose an existential threat? Or in an incident not from Hollywood fiction, an Air Force official’s recent remarks implying that a drone had autonomously changed course and killed its operator, only to be later declared a hypothetical, certainly raised alarm.
Closer to home for most of us, the release of large language models like ChatGPT have renewed worries about automation, reminiscent of earlier fears about mechanization. AI has advanced far beyond rote data-storage tasks and can even pass the bar exam, or write news, or research papers, leading to fears of massive white-collar unemployment.
But, as new research looking at data of job churn over the past two decades finds, the impact of automation on workers and industries is, in fact, pretty hard to predict given the complexity of the labor market, requiring carefully crafted policies that take these nuances into account.
First, changes in exposure to automation are not intuitive: they do not easily mesh with “blue-collar” and “white-collar” jobs, as typically defined. Instead, automation is more closely linked to the tasks and characteristics of each job, such as repetitiveness and face-to-face interactions. That translates to the three most automation-exposed jobs: office and administrative support, production, and business and financial operations occupations.
Meanwhile, the three least automation-exposed jobs are in personal care; installation, maintenance and repair occupations; and teaching. In other words, even with the Internet of Things controlling your HVAC system, it cannot fix itself when it needs new refrigerant, but its smart-panel interface can help the technician diagnose the problem remotely quickly and know what equipment to bring for a repair. But back-end accountants in that company may not fare as well in the AI jobs sweepstakes.
While automation can displace workers, history suggests that new technology also tends to boost productivity and create new jobs. Consider the automobile: while horses and buggies are outdated, we still need humans to drive (at least until autonomous vehicles come to full fruition), and the assembly line helped automate manufacturing with entire new classes of jobs created for every part of a car and all its electronic systems, with almost 1 million U.S. workers in auto manufacturing today.
But automation has continued in the auto industry over the decades, with robots helping to make hard and heavy physical labor tasks easier, without fully displacing workers. So there is a push-pull with automation, and the relative sizes of these countervailing effects remains an area of active scholarly debate.
“ It is rare for an entire job class to disappear overnight; changes mainly take place over generations ”
Second, it is rare for an entire job class to disappear overnight; changes mainly take place over generations. The research shows that newer generations of workers, perhaps deterred by the job insecurity observed in earlier generations and lured by high wages in the technology sector, are less inclined to enter automation-prone jobs than those before them. However, after embarking down those career paths, workers tend to stay in their fields, even if the prospects of automation loom large, likely because reskilling is time-consuming and expensive. It is relatively easy for recent high school graduates to opt for tech-centric college degrees like computer science, but learning new skills like coding is more difficult for mid-career professionals in automation-susceptible fields like manufacturing.
Adjustments to automation can be slow on the business side as well. Incorporating automated technology takes time because modern production tasks tend to be so intertwined that automating one part of a business can affect all other operations. For example, when AT&T, once the country’s largest firm, began replacing telephone operators with mechanical switchboards, they found that operators had become central to the complex production system that grew around them, which is why there are fewer operators today, but some still exist.
Third, the research found that the share of workers in highly automation-exposed occupations tends to be clustered, ranging from about 25% to 36% across commuting zones. The least-exposed areas in the U.S. are across the Mountain West, thanks to the area’s high shares of workers in management, retail sales and construction (which hasn’t had much automation or productivity improvement in decades but additive manufacturing may be a game-changer), as well as those on the East and West coasts, with their more innovative finance and tech industries.
On the other hand, those most exposed to automation tend to be located in the Great Plains and Rust Belt, namely due to agriculture. In spite of the fact that U.S. agriculture has been exposed to automation for over a century (more efficient machines and advances in biotechnology), it has become even more technology-driven recently, making ag workers more likely to be impacted by automation.
Read: How artificial intelligence can make hiring bias worse
So will the robots take over your job soon? More likely, they will make our jobs easier and more efficient. Trying to slow the adoption of technology is both futile and counterproductive: taxing or overregulating tech adoption may backfire, especially given global competitiveness and other countries who may not pause. While the advent of a new era of automation is likely to be both gradually incorporated and result in complements to human labor rather than full replacement, thoughtful policies can help disrupted workers transition to new and better opportunities, ensuring we can harness the transformative power of automation and foster a future of work that benefits all.
Eric Carlson is associate economist at the Economic Innovation Group; DJ Nordquist is EIG’s executive vice president.
More: AI is ready to take on menial tasks in the workplace, but don’t sweat robot replacement (just yet)
Also read: ‘Make friends with this technology’: Yes, AI is coming for your job. Here’s how to prepare.
The heads of prominent U.S. and Indian companies will meet at the White House on Friday with President Joe Biden and Indian Prime Minister Narendra Modi to discuss investment in areas including artificial intelligence.
Those attending include Sam Altman, CEO of OpenAI, as well as Apple
AAPL,
CEO Tim Cook and Google
GOOG,
GOOGL,
CEO Sundar Pichai. Indian company executives include Mukesh Ambani, chair of Reliance Industries, and Anand Mahindra, chair of Mahindra Group.
“The president and Prime Minister Modi of the Republic of India will meet with senior officials and CEOs of American and Indian companies gathered to discuss innovation, investment, and manufacturing in a variety of technology sectors, including AI, semiconductors, and space,” the White House said.
Friday’s meeting is part of Modi’s high-profile visit to Washington, which included a state dinner at the White House and the announcement of a number of business deals.
Now read: Jet engine, drone deals unveiled as Biden meets India’s Modi
Nvidia Corp. executives predicted record revenue well beyond anything the company has experienced Wednesday, pushing shares toward all-time highs, as margins improve with AI-driven data-center sales.
Nvidia
NVDA,
guided for second-quarter revenue of $11 billion, plus or minus 2%; the chip maker has never before reported quarterly revenue higher than $8.29 billion, which it hit in the fiscal first quarter a year ago. Analysts on average were expecting $7.17 billion, according to FactSet, a gain from the $6.7 billion in sales Nvidia put up in the fiscal second quarter last year.
On the conference call with analysts, Huang said the simple way to think about it is that the world has “a trillion dollars of data center installed and it used to be 100% CPU,” or central processing units, as opposed to Nvidia’s graphics processors that data centers and AI models have embraced in recent years. And while the world’s data-center budget is strapped, at the same time larger and larger AI models require more and more computing power, he said.
“The easiest way to think about that is over the next four or five, 10 years, most of that trillion dollars, and compensating adjusting for all the growth in data center still, it will be largely generative AI,” Huang said.
“What happened is, when generative AI came along, it triggered a killer app for this computing platform that’s been in preparation for some time,” he added.
The company forecast adjusted gross margins of 70% for the second quarter, after reporting 66.8% for the first quarter, not only as higher data-center margins counter the deficit in gaming, but as Nvidia Chief Financial Officer Colette Kress said on the call: ” We believe the channel inventory correction is behind us.”
Shares soared more than 25% in after-hours trading, following a 0.5% decline in the regular session to $305.38. Nvidia’s record closing price is $333.76 and the all-time intraday high is $346.47, according to FactSet data. After-hours “prices” topped both of those marks, reaching more than 14% beyond all-time highs for the regular session, as shares registered as high as $395, according to FactSet. The last time Nvidia shares rallied as much in a single session was Nov. 11, 2016, when shares surged 29.8% after the company reported that profit more than doubled.
Meanwhile, shares of rival Advanced Micro Devices Inc.
AMD,
rallied 6% after hours.
Nvidia did not provide full-year guidance, but Chief Executive Jensen Huang has been effusive in his predictions that increased focus on AI from Big Tech partners such as Microsoft Corp.
MSFT,
and Alphabet Inc.
GOOGL,
GOOG,
will lead to revenue gains in the near future. Speaking to the media at Nvidia’s developers conference in March, he said that generative AI has only accounted for a “tiny, tiny, tiny” single-digit percentage of revenue over the past 12 months, but predicted that in the next year, revenue from generative AI will grow to be “quite large — exactly how large, it’s hard to say.”
Nvidia reported fiscal first-quarter earnings of $2.04 billion, or 82 cents a share, on sales of $7.19 billion, a decline from $8.29 billion a year ago but well ahead of expectations. After adjusting for stock compensation and other effects, the chip maker reported earnings of $1.09 a share, a decline from $1.36 a share a year ago. Analysts on average were expecting adjusted earnings of 92 cents a share on sales of $6.53 billion, according to FactSet.
Gaming sales for the first quarter fell 38% to $2.24 billion, while data-center sales at Nvidia rose 14% to a record $4.28 billion, “led by growing demand for generative AI and large language models using GPUs based on our Nvidia Hopper and Ampere architectures.”
“The revenue growth reflects strong demand from large consumer internet companies and cloud service providers,” the company said in a statement. “Enterprise demand for GPU platforms was strong, although general purpose networking solutions declined both sequentially and from a year ago.”
Analysts had expected gaming sales of $1.97 billion — nearly half of last year’s $3.62 billion — and data-center sales of $3.9 billion, a 4% increase from a year ago. Auto chip sales soared 114% to $296 million from a year ago.
Nvidia’s profit and sales have declined in recent quarters as the company deals with oversupply in the market, a result of pandemic-era shortages flipping to a glut after demand for personal computers and gaming gear waned. Analysts expect that trend to end with this report, however, as demand for gear that can power artificial intelligence kicks into higher gear amid a bevy of promises from tech companies about the power of generative AI.
Nvidia’s stock has soared toward all-time highs amid the hype for generative AI, which was launched after the successful debut of OpenAI’s ChatGPT service. Shares have more than doubled so far this year, growing 109% as the S&P 500 index
SPX,
has increased 8%.
Things move quickly in the world of artificial intelligence. It is easy to sit back and complain about developments that could be disruptive, but sometimes investors are best served by putting emotions aside and observing new developments and how they affect markets. Could AI developments and related trends make you a lot of money?
Below is a new screen showing a group of AI-oriented companies expected to increase their sales most rapidly through 2025, based on consensus estimates among analysts polled by FactSet. Then we show expected revenue growth rates for the largest AI-oriented companies in the screen.
Over the long haul, many businesses might perform more efficiently by employing AI. Maybe this technology can create an economic revolution similar to the one that moved the majority of the working population away from agricultural labor during the 19th and 20th centuries.
Back in February, we screened 96 stocks held by five exchange-traded funds focused on AI and related industries and listed the 20 that analysts thought would rise the most over the following 12 months.
Three months is a long time for AI, and the shakeout hasn’t even started.
Read: Congress and tech seem open to regulating AI efforts, but that doesn’t mean it will happen
There is no way to predict how politicians will react to perceived or real threats of AI and machine learning. And the largest U.S. tech players are doing everything they can to employ the new technology and remain dominant. But that doesn’t mean they will grow more quickly than smaller AI-focused players.
Once again we will begin a screen with these five ETFs:
Altogether and removing duplicates, the five ETFs hold 270 stocks of companies in 23 countries. We first narrowed the list to 197 covered by at least nine analysts and for which consensus sales estimates are available through calendar 2025. We used calendar-year estimates because some companies have fiscal years that don’t match the calendar.
Here are the 20 screened AI-related companies expected by analysts to have the highest compound annual growth rates (CAGR) for sales from 2023 through 2025. Sales estimates are in millions of U.S. dollars. The list also shows which of the above five ETFs holds each stocks.
| Company | Ticker | Estimated sales – 2023 ($mil) | Estimated sales – 2024 ($mil) | Estimated sales – 2025 ($mil) | Two-year estimated sales CAGR through 2025 | Held by |
| BioXcel Therapeutics Inc. |
BTAI, |
$5 | $39 | $121 | 411.5% | WTAI |
| Luminar Technologies Inc. Class A |
LAZR, |
$86 | $266 | $588 | 161.0% | ROBT, WTAI |
| BlackBerry Ltd. |
BB, |
$685 | $769 | $1,925 | 67.6% | ROBT |
| Credo Technology Group Holding Ltd. |
CRDO, |
$183 | $259 | $363 | 40.9% | IRBO |
| SentinelOne Inc. Class A |
S, |
$619 | $881 | $1,176 | 37.9% | WTAI |
| Wolfspeed Inc. |
WOLF, |
$982 | $1,323 | $1,860 | 37.6% | WTAI |
| SK hynix Inc. |
000660, |
$18,319 | $27,899 | $34,542 | 37.3% | WTAI |
| Mobileye Global Inc. Class A |
MBLY, |
$2,109 | $2,782 | $3,920 | 36.3% | ROBT, WTAI |
| Snowflake Inc. Class A |
SNOW, |
$2,811 | $3,863 | $5,139 | 35.2% | IRBO, THNQ, WTAI |
| Lemonade Inc. |
LMND, |
$395 | $471 | $712 | 34.2% | THNQ, WTAI |
| Nio Inc. ADR Class A |
NIO, |
$11,874 | $16,733 | $21,304 | 33.9% | ROBT |
| Stem Inc. |
STEM, |
$607 | $833 | $1,055 | 31.8% | WTAI |
| Upstart Holdings Inc. |
UPST, |
$547 | $768 | $938 | 31.0% | BOTZ, WTAI |
| Cloudflare Inc. Class A |
NET, |
$1,284 | $1,669 | $2,194 | 30.7% | THNQ |
| Samsara Inc. Class A |
IOT, |
$830 | $1,062 | $1,364 | 28.2% | THNQ |
| Ambarella Inc. |
AMBA, |
$287 | $355 | $472 | 28.2% | IRBO, ROBT, THNQ, WTAI |
| iflytek Co. Ltd. Class A |
002230, |
$3,561 | $4,582 | $5,851 | 28.2% | THNQ |
| Tesla Inc. |
TSLA, |
$99,558 | $128,412 | $161,061 | 27.2% | ROBT, THNQ, WTAI |
| CrowdStrike Holdings Inc. Class A |
CRWD, |
$2,935 | $3,793 | $4,739 | 27.1% | THNQ, WTAI |
| PB Fintech Ltd. |
543390, |
$358 | $462 | $573 | 26.5% | IRBO |
| Source: FactSet | ||||||
Click the tickers for more about each company or ETF.
Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote pages.
We have screened for expected revenue growth, rather than for earnings or cash flow, because in a newer tech-oriented business area, investors are most likely to consider the top line as companies sacrifice profits to build market share.
It is important to do your own research if you consider purchasing any individual stock, to form your own opinion about a company’s ability to remain competitive over the long term. Starting from the top of the list, BioXcel Therapeutics Inc.
BTAI,
is expected to show exponential sales growth, but that is from a low expected baseline this year.
What about the largest AI-related companies held by these ETFs?
Here are the largest 20 companies in the screen by market capitalization, ranked by expected sales CAGR from 2022 through 2025. Once again the sales estimates are in millions of U.S. dollars, but the market caps are in billions.
| Company | Ticker | Estimated sales – 2023 ($mil) | Estimated sales – 2024 ($mil) | Estimated sales – 2025 $mil) | Two-year estimated sales CAGR through 2025 | Market Cap ($bil) | Held by |
| Tesla Inc. |
TSLA, |
$99,558 | $128,412 | $161,061 | 27.2% | $528 | ROBT, THNQ, WTAI |
| Nvidia Corp. |
NVDA, |
$29,839 | $36,877 | $46,154 | 24.4% | $722 | BOTZ, IRBO, ROBT, THNQ, WTAI |
| Taiwan Semiconductor Manufacturing Co. Ltd. ADR |
TSM, |
$71,434 | $86,284 | $101,112 | 19.0% | $445 | ROBT, WTAI |
| Advanced Micro Devices Inc. |
AMD, |
$22,976 | $26,823 | $30,359 | 15.0% | $163 | IRBO, ROBT, THNQ, WTAI |
| ASML Holding NV ADR |
ASML, |
$28,974 | $32,374 | $37,796 | 14.2% | $263 | THNQ, WTAI |
| Microsoft Corp. |
MSFT, |
$223,438 | $251,028 | $282,397 | 12.4% | $2,318 | IRBO, ROBT, THNQ, WTAI |
| Samsung Electronics Co. Ltd. |
005930, |
$200,595 | $227,286 | $252,129 | 12.1% | $292 | IRBO, WTAI |
| Amazon.com Inc. |
AMZN, |
$559,438 | $626,549 | $702,395 | 12.1% | $1,164 | IRBO, ROBT, THNQ, WTAI |
| Adobe Inc. |
ADBE, |
$19,470 | $21,784 | $24,276 | 11.7% | $158 | IRBO, THNQ |
| Netflix Inc. |
NFLX, |
$33,915 | $38,067 | $42,275 | 11.6% | $148 | IRBO, THNQ |
| Tencent Holdings Ltd. |
700, |
$88,727 | $99,212 | $110,556 | 11.6% | $422 | IRBO, ROBT |
| Salesforce Inc. |
CRM, |
$34,392 | $38,273 | $42,786 | 11.5% | $205 | IRBO, THNQ |
| Alphabet Inc. Class A |
GOOGL, |
$299,810 | $333,077 | $369,195 | 11.0% | $710 | IRBO, ROBT, THNQ, WTAI |
| Intel Corp. |
INTC, |
$51,060 | $57,799 | $62,675 | 10.8% | $122 | IRBO, ROBT |
| Meta Platforms Inc. Class A |
META, |
$125,901 | $139,545 | $154,259 | 10.7% | $528 | IRBO, WTAI |
| Alibaba Group Holding Ltd. ADR |
BABA, |
$134,140 | $148,206 | $162,199 | 10.0% | $235 | ROBT, THNQ |
| Texas Instruments Inc. |
TXN, |
$17,941 | $19,433 | $20,799 | 7.7% | $148 | IRBO |
| Apple Inc. |
AAPL, |
$390,845 | $416,761 | $445,956 | 6.8% | $2,706 | IRBO, WTAI |
| Siemens Aktiengesellschaft |
SIE, |
$84,681 | $89,145 | $93,925 | 5.3% | $130 | ROBT |
| Johnson & Johnson |
JNJ, |
$98,761 | $100,990 | $103,870 | 2.6% | $414 | ROBT |
| Source: FactSet | |||||||
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