Artificial intelligence (AI) can be considered one of the most transformative technology trends since the start of the Internet in 1995. AI stocks have outperformed the market, with the Global Artificial Intelligence ETF rising to 52.4% year to date compared with the S&P 500’s 23.4% return in the same period.
Spending on AI systems is expected to accelerate over the next several years as organizations deploy AI as part of their digital transformation efforts and to remain competitive in the digital economy. Predictions for 2024 are largely centered around the emergence of AI as a major inflection point in the technology industry, especially for players like Meta Platforms META, Intel Corporation INTC, NVIDIA NVDA and UiPath PATH.
According to the IDC’s Worldwide Artificial Intelligence Spending Guide, global spending on AI is forecast to double over the next four years, growing from $50.1 billion in 2020 to more than $110 billion in 2024, with a compound annual growth rate (CAGR) of 20.1% between the 2019-2024 period.
The largest share of software spending is expected to go to AI applications ($14.1 billion), while the largest category of services spending will be IT services ($14.5 billion). Servers ($11.2 billion) will dominate hardware spending. Software will see the fastest growth in spending over the forecast period with a five-year CAGR of 22.5%.
By 2025, Global 2000 (G2000) organizations are expected to allocate more than 40% of their core IT spending to AI-related initiatives, leading to a double-digit increase in the rate of product and process innovations.
What's Next: The 2024 AI Landscape
There are already signs that AI monetization has started to impact the technology sector, with solid quarterly results from Microsoft MSFT, Datadog and Palantir Technologies that show new ways to harness AI are exploding across the enterprise and consumer landscape.
While AI is not a new technology, companies have been investing heavily in predictive and interpretive AI for years, the announcement of the GPT-3.5 series from OpenAI in late 2022 captured the world's attention and triggered a surge of investment in generative AI.
Microsoft announced huge investments in OpenAI in January 2023. Google debuted AI-powered search and BARD in May 2023, while NVIDIA’s market cap hit the $1 trillion mark in late May 2023 on AI euphoria, which boosted the demand for chips. OpenAI then debuted GPT enterprise in late August 2023, followed by Amazon’s bet on Anthropic in September. The Biden government signed an AI executive order in October 2023, Amazon announced the launch of its new chatbot, "Q," in late November 2023 and Google unveiled its most effective Generative AI model, Gemini, in December 2023.
The year 2024 is likely to witness the launch of AI-equipped PCs and other devices, moving some cloud-based AI processes to local devices. For instance, Google's Pixel 8 series, with the Tensor G3 chip, showcases AI-driven features like photo editing and audio filtering. Investors can expect similar advancements from companies like HP, Dell, Lenovo and possibly Apple.
The hype over AI and cloud computing has driven investors to snap up stocks of companies set to be winners in 2024. The Nasdaq 100 has surged more than 40% in 2023, trumping the S&P 500 Index’s roughly 15% gain.
Image Source: Zacks Investment Research
NVIDIA is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. This Zacks Rank #2 (Buy) company’s datacenter end-market business is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds for NVDA. Collaboration with Mercedes-Benz and Audi is likely to advance NVDA’s presence in the autonomous vehicles and other automotive electronics space.
NVIDIA expects its fourth-quarter fiscal 2024 revenues to reach $20 billion from $6.05 billion in the year-ago quarter. The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $12.29 per share, up 13.2% in the past 30 days. Shares of NVDA have surged 234.5% year to date.
Meta Platforms forayed into the space of LLMs with its state-of-the-art foundational language model known as Large Language Model Meta AI (“Llama”). In collaboration with Microsoft, Meta unveiled the next generation of Llama, called Llama 2. This Zacks Rank #2 company also released Code Llama, an LLM that can use text prompts to generate and discuss code.
The company is also launching Meta AI in beta, an advanced conversational assistant, which will be available on WhatsApp, Messenger and Instagram. Meta AI will also be available on Ray-Ban Meta smart glasses and Quest 3.
Meta expects total revenues between $36.5 billion and $40 billion for the fourth quarter of 2023. The Zacks Consensus Estimate for 2024 earnings is pegged at $14.32 per share, up 0.4% in the past 30 days. Shares of META have surged 178.3% year to date.
UiPath launched a number of AI-enabled services on its platform that are expected to boost top-line growth in 2024. These include new features for existing AutoPilot services, as well as broader cross-platform connectivity options. Autopilot for Assistant is an AI companion that helps you tackle your daily task list. It securely blends the best of Generative AI and Specialized AI to work with a wide variety of systems and documents. Autopilot for Studio enhances the productivity of both professional and new developers, empowering them to use natural language in their work.
In November 2023, UiPath Clipboard AI was named one of TIME's Best Inventions of 2023 in the Productivity category. Clipboard AI eliminates the need for manual copy-pasting.
Looking to the fourth quarter, this Zacks Rank #2 company predicts revenues between $381 million and $386 million and ARR around $1.45 billion. The Zacks Consensus Estimate for 2024 earnings is pegged at 47 cents per share, up 17.5% in the past 30 days. Shares of PATH have surged 102% year to date.
Last week, Intel Corporation launched AI chips for data centers and PCs. This marks one of the largest architectural shifts for the company in 40 years. The strategic decision is primarily aimed at gaining a firmer footing in the expansive AI sector, spanning cloud and enterprise servers to networks, volume clients and ubiquitous edge environments, in tune with the evolving market dynamics.
This Zacks Rank #2 company further provided an update on the availability of Intel Gaudi3. These chips — known as AI accelerators — are slated to be released in 2024. The next-generation AI accelerator will likely help companies develop chatbots and other rapidly proliferating services for deep learning and large-scale generative AI models. With increasing demand for generative AI solutions, Intel expects to capture a greater pie of the accelerator market in 2024 with its suite of AI accelerators led by Gaudi.
For the fourth quarter of 2023, Intel offered bullish guidance and currently expects non-GAAP revenues to be $14.6-$15.6 billion. The Zacks Consensus Estimate for 2024 earnings is pegged at 95 cents per share, unchanged in the past 30 days. Shares of INTC have surged 74.7% year to date.
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