Will the AI stock craze lose steam? | AI Weekly Review

To the Moo joined discussion · Jun 6, 2023 10:58

AI Weekly Review:

1.Generating AI is expected to see explosive growth, with a 30-fold increase in market size

2.OpenAI and Supermicro challenge Nvidia, saying that there are not enough GPUs available!

3.Wall Street experts are clashing over whether NVIDIA's valuation is too high

4.The next "Nvidia": Broadcom?

5.Apple is launching an AIGC+MR strategy, where AI+XR will become the next battlefield for mobile devices.

6.The price of Microsoft Office 365 AI assistant is exposed, costing 40% more than the original version.

7.Cathy Wood predicts that the next wave of AI trends will be in software stocks.

1.The market size is expected to increase 30-fold!

According to a recent report by Bloomberg Intelligence, ChatGPT will bring a decade of prosperity to the generative AI market, which is expected to expand at a rate of 42%. The report predicts that in nine years, or 2032, the global generative AI market will reach $13 trillion, 32.5 times the market size of $40 billion last year.

Will the AI stock craze lose steam? | AI Weekly Review

Goldman Sachs previously stated in a report that the current generative AI penetration stage is still early, and that with the AI boom, the overall TAM (Total Addressable Market) of enterprise generative artificial intelligence software will reach $150 billion.

At that time, the overall market size of global enterprise software will reach $685 billion. Existing software will also have some price increase space due to the additional functions of generative AI, with an average annual spending of $78 per person on generative AI.

Goldman Sachs also believes that although AI applications are being updated at an exponential rate, the future will still be led by tech giants including $Microsoft (MSFT.US)$, $Alphabet-A (GOOGL.US)$, $NVIDIA (NVDA.US)$, $Amazon (AMZN.US)$, $Salesforce (CRM.US)$, $Meta Platforms (META.US)$, $Intuit (INTU.US)$, and $Adobe (ADBE.US)$, who will lead the future of generative AI.

2.OpenAI and Supermicro call for Nvidia, saying that GPUs are in short supply!

Currently, the biggest complaint from OpenAI's customers is the reliability and speed of its API. OpenAI CEO Sam Altman has acknowledged the severe shortage of GPUs, which has delayed many short-term plans. The tuning of APIs and dedicated capacity products have been limited by the availability of GPUs.

Supermicro's founder and CEO Liang Jianhao said that the market demand for AI is strong, and the company is expanding production capacity in the United States, the Netherlands, Malaysia, and Japan. It is expected that the production capacity of 4,000 cabinets will be increased to 5,000 before the end of the year. He also asked Huang Renxun to provide more chips, even if they are already provided, as they are insufficient.

With the push of generative AI demand, GPU products will face sustained shortages and price increases. Nvidia's current delivery cycle is still getting longer, from one month previously to basically three months or more now, and even some orders cannot be delivered until the end of the year.

3.Wall Street experts are clashing over whether NVIDIA's valuation is too high.

Some people feel that AI valuations are too high and have reduced their positions, while others believe that Nvidia's current stock price is still low.

Stacy Rasgon, an analyst at New York investment research firm Bernstein, said in an interview with CNBC that Wall Street recently raised Nvidia's target stock price because the previously estimated profit expectations were too low. Different voices still exist among investors, such as Cathy Wood, CEO of Ark Investment, who believes that Nvidia's valuation is too high and has already entered the bubble stage.

4.The next "Nvidia": Broadcom?

After $Broadcom (AVGO.US)$ announced better-than-expected financial results on June 2nd, Wall Street analysts believe that Broadcom could be another "shovel seller" company benefiting from the demand for AI infrastructure, following Nvidia.

Broadcom CEO Hock Tan said on a conference call after the financial report that under the AI boom, the demand for AI chips from many companies will double the company's AI-related revenue. It is expected that AI-related revenue in the next fiscal year will increase to about $7.5 billion, and AI chip revenue will soon surpass 25% of the company's total revenue. It is expected that Broadcom's revenue in the third quarter will reach about $8.85 billion, a year-on-year increase of 5%.

Morgan Stanley analysts stated that with the recent multi-billion dollar agreement between Apple and Broadcom, and Google increasing orders with Broadcom, if Broadcom can reach its revenue expectations, it will surpass Intel and AMD and become the world's second-largest chip supplier.

Seeing the development potential of Broadcom with AI support, analysts have raised their target prices for the company: Benchmark Research has raised its target price from $770 to $950; SIG Susquehanna Financial Group has raised its target price from $785 to $910; Mizuho Securities has raised its target price from $720 to $840; and Truist Securities has raised its target price from $700 to $890.

5.Apple is launching an AIGC+MR strategy

From June 6th to 10th, the Apple Worldwide Developers Conference (WWDC) will be held globally, and the market has high expectations for MR. Considering Apple's significance as a trendsetter in consumer electronics, the long-awaited MR after seven years may bring a heavy bomb to the XR industry, and everyone is looking forward to the new changes that MR will bring, both in terms of technology and user experience.

Especially considering the rapid development of generative AI and its combination with MR, it will bring a comprehensive upgrade to mobile products, especially in innovative application content, greatly improving the current problem of few popular game categories in the XR industry. This will also become an important factor for the sinking of the MR market. The breakthrough point for the penetration of XR games into growth bottleneck before was the small-scale application ecosystem.

Apple has an extremely large number of loyal fans in its ecosystem. With all-round high-quality integration of content, terminals, and ecology, it will help to quickly sell MR and drive a new round of development cycle for the XR industry chain.

6.Microsoft Office 365 AI Assistant pricing revealed, 40% higher than the original version

According to The Information, more than 600 of Microsoft's largest customers, including Bank of America, Walmart, Ford, and Accenture, are expected to try the artificial intelligence features in Microsoft Office 365. At least 100 customers have already paid an annual fee of up to $100,000 for an additional 1,000 subscription accounts.

Compared with the classic version, this AI version of Office 365 is at least 40% more expensive and has value-added features such as automatic text writing in Word documents and automatic creation of PPTs. With 1,000 accounts paid by each of the 600 customers, Microsoft will earn $60 million in revenue.

In addition, Microsoft plans to start using the Teams 2.0 version as default on Win10 and Win11 platforms before the end of 2023; release the Teams 2.0 preview version to Mac, VDI, and web users, and further promote it to other customer groups such as education and government.

This will greatly accelerate the process of PC AI, including the convenience and intelligence of video conferencing, AI chat assistants, Office365, and many other tools, which will completely change users' usage habits. Of particular note is that the upgraded Teams 2.0 takes up less memory and is faster, making multi-threading and high-frequency use smoother without lagging.

7.Cathy Wood predicts the next wave of AI trends will be in software stocks.

Cathy Wood has made a new prediction that she believes the larger market for artificial intelligence is actually in software. For every $1 of hardware sold by Nvidia, software and SaaS providers generate $8 in revenue.

Now, Cathy Wood is betting on software stocks that she expects to benefit from AI. Her fund holds three stocks: $UiPath (PATH.US)$, $Twilio (TWLO.US)$, and $Teladoc Health (TDOC.US)$. The first two have risen over 40% this year, while the latter has fallen over 2%.

However, considering that the US economy is still unstable, enterprise customers who turned to cloud software in the first two years of the pandemic are now looking to cut costs. $Okta (OKTA.US)$ CEO Todd McKinnon acknowledged this and expressed concerns about the deteriorating macroeconomic situation.

The ability of enterprises to meet performance targets is also questionable. When asked on a conference call whether $Salesforce (CRM.US)$had a chance to earn more revenue from AI, co-founder and CEO Marc Benioff was vague. And executives at $CrowdStrike (CRWD.US)$ were also unclear when talking about revenue growth from quantified AI.

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