Goldman Sachs has outlined the next phases of Artificial Intelligence (AI) trade and the potential stocks to invest in as the AI boom continues to evolve. According to Ryan Hammond from Goldman’s portfolio strategy research team, the AI trade still has room to grow beyond the current big winners like Nvidia, despite concerns about high valuations in the market.
The progression of the AI trade is expected to move through three main phases, with new winners emerging as different sectors adapt to AI technologies. The second phase is predicted to focus on companies that develop and maintain the infrastructure needed for AI, including chipmakers, cloud providers, tech firms, and utilities. This will pave the way for a third phase where companies utilize AI tools to boost their revenues, and eventually a fourth phase where AI-driven productivity gains lead to increased profitability.
Evidence suggests that the market is already anticipating these upcoming phases, with a basket of Phase 2 stocks showing a 14% increase over the past 6 months driven by valuation expansion. Some of the key stocks highlighted by Goldman for Phase 2 investments include tech giants like Amazon, chip stocks like Broadcom, and semiconductor companies like GlobalFoundries.
Additionally, companies involved in developing the hardware for AI, such as Teradyne and Keysight Technologies, present potential investment opportunities as they play a crucial role in supporting the AI ecosystem. Cybersecurity firms like Palo Alto Networks and utility companies like NextEra Energy are also poised to benefit from the growing demand for AI data storage and protection.
Looking ahead, software companies like Intuit and Adobe are expected to see revenue growth from AI adoption, while companies like Pinterest, Tenet Healthcare, and Clarivate could experience productivity gains in the future. These companies, along with others highlighted by Goldman, offer investors a pathway to capitalize on the evolving AI landscape and its impacts across various industries.
