As AI Is Driving the Market, It's Time to Think Bigger on AI
The gaming and AI chip company's shares rose 4.5% in trading before the bell on Tuesday.
Artificial intelligence-related stocks like Nvidia have soared this year, but according to one research firm there's a portion of financial markets that hasn't heavily jumped into the buying frenzy: individual investors.
Our in-house US equity positioning shows retail investors remain on the sidelines despite the recent AI craze," Vanda Research said in a note last week, adding that institutional investors were the primary drivers of demand for AI stocks.
Dane, a Goldman Sachs tech portfolio manager, sees four basic ways to play the opportunity in AI. There are pick-and-shovel plays, which enable data centers to run these AI workloads. There are infrastructure needs around AI, "given that data is the key to all this." There are security firms. And there are applications that will benefit from the addition of AI.
For data technology plays: Dane says companies want to train models on their own internal data, without sharing intelligence with the world. That requires "cleaning and sandboxing" data, he says, which is a boost to companies like $Snowflake(SNOW.US)$ and $Datadog(DDOG.US)$ that help companies warehouse and analyze information.
In security: Dane's top pick to protect against the new threat is $Palo Alto Networks(PANW.US)$. Dane says Palo Alto has data on "threat vectors" that dwarf anything their customers could compile. "They are going to run AI models across that data to identify threats earlier, faster, and better than any other companies.” He's also bullish on $Zscaler(ZS.US)$, a cloud security software company.
The applications: "This is the earliest area, but will be the biggest over time," Dane says. "We're looking for the obvious places these tools can get deployed in a responsible and safe way." One stock he likes is $HubSpot(HUBS.US)$, which provides customer relationship software for small and medium-size businesses. He thinks HubSpot can use AI to make its customers more productive and efficient in their marketing spend.
Source: YahooFinance; Goldman Sachs; Barron's
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