Whether the stock market performs well or not, you can always expect your next big investment to be the talk of Wall Street. The next big investment for 2023 is artificial intelligence (AI).
AI makes use of software, systems, and machines to handle tasks normally supervised by humans. AI’s machine learning capabilities make this technology applicable to a wide range of applications and its growth potential is not limited to any particular sector or industry.
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Estimates on AI adoption rates and ultimate market value vary widely, but Grand View Research foresees significant growth. According to a recently released report, the global AI market will grow at a staggering 37.3% CAGR between 2023 and 2030.
This potential is certainly not lost among Wall Street institutions, analysts and pundits. According to Wall Street, his next three artificial intelligence stocks have between 54% and 675% upside potential (based on issued price targets).
Tesla: 675% implied upside
The first AI stocks that at least one Wall Street pundit believes could soar are electric vehicle (EV) makers. Tesla (TSLA -0.66%)In a published report, Ark Invest CEO Cathie Wood said Tesla’s stock hit $4,600, or $1,533.33 per share, after taking into account the 3-for-1 stock split Tesla enacted last August. I insisted. If ultimately achieved, this would be up 675% from her March 3 closing price.
Tesla is incorporating AI into its business in a number of ways. Most obviously, Tesla is using AI in its Level 2 Full Self-Driving (FSD) software used in its EVs. Tesla’s EVs aren’t fully autonomous, but they use sensors and machine vision cameras to make split-second decisions based on surrounding vehicles, pedestrians, and obstacles. The data Tesla has collected from hundreds of thousands of EVs on the road should help the company plan future improvements to both his FSD software and his AI-focused FSD chip.
On an even more futuristic scale, Tesla is venturing into robotics. CEO Elon Musk says the Tesla Bot (officially he’s known as Optimus) is a robotic humanoid designed to handle repetitive tasks and one day it’ll be as common in homes as it is in industrial settings. said it could become a target.
But Tesla’s AI ambitions are far from being realized. Musk has never lacked far-reaching innovation, but he has struggled to deliver on his promises. Investors tend to factor Musk’s promises into Tesla’s valuation, ignoring the fact that Musk has repeatedly put off innovation.
The biggest problem with Tesla is that it’s just a car company. Almost all of its gross margins are dependent on EV sales and, to a lesser extent, on leasing and sales of renewable energy credits. The rest of Tesla’s businesses are low-margin and loss-making. Until this changes, Tesla is overvalued as just a car company and is highly unlikely to hit Wood’s moonshot price target.
CrowdStrike Holdings: 86% Implied Upside
The second AI-driven company that one Wall Street analyst believes could skyrocket over the next year is cybersecurity stocks. Crowdstrike Holdings (CRWD -0.44%)JMP Securities analyst Trevor Walsh expects CrowdStrike to reach $235 per share.
AI is absolutely integral to what CrowdStrike does to protect end users from various cyberthreats. The company’s cloud-native platform, Falcon, uses AI and machine learning capabilities to monitor trillions of events every week. All events are added to Falcon’s database, making it more efficient over time to recognize and respond to potential threats.
The true value of Falcon can be seen in CrowdStrike’s quarterly total retention rates. While there are cheaper cybersecurity solutions available to end users, CrowdStrike’s total retention rate rose from 93% to over 98% from the beginning of fiscal year 2018 to the end of fiscal year 2022. as-a-service (SaaS) solutions.
But that’s not all. In addition to remaining loyal to CrowdStrike, the company’s 21,146 subscribers are steadily adding to its initial purchases. Over 5 years ago, he was less than 1 in 10 subscribers who purchased 4 or more cloud module subscriptions. As of the company’s Q3 FY2023 report, 60% of his 21,146 clients had purchased at least five cloud module subscriptions. Those additional sales lifted the company’s adjusted subscription gross margin to nearly 80% of his.
Finally, cybersecurity has practically become an essential service. Hackers and robots don’t hesitate to steal sensitive data just because Wall Street is having a bad day. The defense of enterprise-based cybersecurity needs, combined with a profitable subscription-driven operating model, could ultimately allow CrowdStrike to hit his top-of-the-range pricing targets for JMP Securities.
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Meta Platform: 54% Potential Upside
The third artificial intelligence stock to surge based on the predictions of at least one Wall Street analyst is the social media giant. meta platform (meta 0.08%)The company, formerly known as Facebook, was recently given a $285 price target by Tigress Financial analyst Ivan Feinseth. If Feinseth is correct, Meta’s stock is up up to 54% since last week’s close.
There are many ways Meta is using AI to improve existing operations and activate new sales channels. A good example is Meta, which uses machine learning software and natural language processing to monitor and remove violent, sexually explicit and hateful speech on its platform.
Another example came when Meta launched Advantage+ this past August. It’s a machine learning solution designed to help advertisers reach their audiences more effectively. Advantage+ helps eliminate costly and time-consuming manual ad creation and can automate up to 150 combination ads at once. As a result, businesses can more quickly determine which aspects and price points of advertising resonate with consumers.
Meta’s AI ambitions also include an Oculus virtual reality device, but the company’s performance shows it still relies heavily on advertising. Of his $116.6 billion in revenue last year, all but $3 billion came from advertising.
Again, this is not a bad thing. Ad revenue will naturally fall while the economy is contracting, but the U.S. and global economies are spending a disproportionate amount of time expanding. Given that more than half of the world’s adult population accesses Meta-owned social media assets (Facebook, WhatsApp, Instagram, or Facebook Messenger) every month, Meta-owned social media assets are frequently powerful will have significant advertising pricing power.
It may take time for AI solutions to become a significant part of Meta’s earnings, but a $285 price target for such a dominant social media stock is certainly achievable at some point in the future. is.
