These stocks will benefit from AI — why they are better choices than the hottest picks, says Goldman Sachs
By Frances Yue
Stock investors should focus on companies that would benefit from adopting artificial intelligence in the long term, instead of the near-term beneficiaries, which have already seen significant appreciation in their share prices, according to Goldman Sachs.
Near-term AI beneficiaries, including NVIDIA (NVDA), Meta (META), Amazon (AMZN), Salesforce (CRM), Marvell Technology (MRVL), Adobe(ADBE), Alphabet (GOOGL), ServiceNow (NOW), Microsoft Corporation (MSFT), Intuit (INTU) and Credo Technology (CRDO), on average recorded a return of 66% so far this year, while the S&P 500 SPX saw a year-to-date return of 15%, noted David J. Kostin, chief U.S. equity strategist at Goldman Sachs.
Some companies, which will benefit from AI in the long term, could get a boost in their earnings per share through higher sales and/or margins, Kostin wrote in a Sunday note.
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The Russell 1000 RUI companies, or the top 1000 companies by market capitalization in the U.S., could see a median 19% increase in their earnings per share boosted by AI, according to Kostin.
Kostin also listed 50 companies that could become long-term beneficiaries of AI in sectors that range from communication services to consumer discretionary to energy to financials to information technology. They are expected to see an increase in baseline earnings of up to 388% with a boost from AI. (See below)
-Frances Yue
Sector Company name Potential change to baseline earnings from AI(%) Communication services Pinterest, Inc. 162 New York Times Company 67 News Corp. 63 ZoomInfo Technologies Inc 58 Sector median 18 Consumer discretionary H&R Block, Inc. 57 Kohl's Corp. 49 Coupang, Inc. 49 CarMax, Inc. 42 Amazon.com, Inc 39 Lear Corp. 30 Sector median 19 Consumer staples Walmart Inc. 44 Walgreens Boots Alliance, Inc. 38 Costco Wholesale Corp. 31 Sector median 18 Energy Occidental Petroleum Corp. 9 Williams Companies, Inc 9 Sector median 7 Financials Kemper Corp 42 Brown & Brown, Inc 40 First American Financial Corp 38 Willis Towers Watson 36 Marsh & McLennan Companies, Inc 30 Fidelity National Financial, Inc. 30 Voya Financial, Inc. 30 Sector Median 17 Health Care Tenet Healthcare Corp 135 DaVita Inc. 105 Universal Health Services, Inc. 91 IQVIA Holdings Inc 77 R1 RCM Inc 77 Encompass Health Corp. 68 Illumina, Inc. 54 Sector Median 20 Industrials Clarivate PLC 232 Robert Half Inc. 150 Ceridian HCM Holding, Inc 125 Tetra Tech, Inc. 122 Science Applications International Corp 115 Sector Median 25 Information Technology Guidewire Software, Inc. 388 Alteryx, Inc. 203 MongoDB, Inc. 193 Nutanix, Inc 177 Smartsheet, Inc. 171 Snowflake, Inc. 154 Twilio, Inc. 138 DXC Technology Co 95 BILL Holdings, Inc 93 HubSpot, Inc. 91 Accenture Plc 80 Elastic NV 76 Cognizant Technology Solutions Corp 76 Sector median 25 Materials International Paper Company 41 Sector median 17 Real Estate Jones Lang LaSalle Incorporated 120 Sector median 10 Utilities Hawaiian Electric Industries, Inc 26 Sector median 16 List median 72 Russell 1000 median 19 Source: Goldman Sachs Global Investment Research
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09-11-23 1424ET
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