Top stocks to benefit from $6 trillion AI Internet opportunity, according to Morgan Stanley
The AI boom is just getting started, with more than $5.9 trillion in AI revenue opportunity in the internet industry, according to Morgan Stanley. The company expects AI-driven innovation to lead to new and improved search tools, AI assistants, stronger social and e-commerce recommendation engines, and more. “We see growing and evolving adoption of consumer AI leading to further growth in digital behavior and sustained multi-year digital revenue and free cash flow growth in the industry,” the analyst team wrote in a note Thursday. “Indeed, our AI-bull case shows how faster digitization can transform the growing $200 billion in US online spending over the next 3 years.” The AI craze started last year with the launch of OpenAI’s ChatGPT. The software is used by Microsoft, which has invested billions in the company to provide updates to its Bing search engine and Edge browser. In February, Google announced its rival chatbot technology, Bard. Google, a subsidiary of Alphabet, is one of several companies that Morgan Stanley sees as the best position to capture the nearly $6 trillion opportunity. The names it identifies could see gains of 6% to 38% over AI-based Morgan Stanley’s base price targets, the firm said. Here are some of those that made the cut. Alphabet already has about 50% upside to Morgan Stanley’s price target and could see another 12% due to AI. The company expects continued AI-driven platform-level innovation across search, YouTube and other offerings and is confident in the company’s long-term growth. “Our sensitive work shows how AI-driven improvements could lead to 10%+ annual revenue growth ($50 billion+) for GOOGL by 2025,” the analysts wrote. Investors weren’t impressed when Google revealed Bard, sending shares 7% lower on the day of the event. Amid criticism of the company’s slow response to ChatGPT, Google CEO Sundar Pichai asked employees to test Bard and reminded them that some of Google’s most successful products weren’t the first to hit the market. “I know this moment is awkwardly emotional, and that’s to be expected. the underlying technology is rapidly evolving with so much potential,” Pichai wrote in a company email seen by CNBC. Alphabet shares are up about 6% year-to-date. Amazon, meanwhile, will be the biggest beneficiary of AI’s impact on e-commerce, according to Morgan Stanley. The company has about 65% upside to Morgan Stanley’s price target and about another 9% upside due to AI. “Our sensitive work on AMZN shows upside here, with a faster-growing, more profitable e-commerce and public cloud business combining to potentially add ~16%+ (~$8 billion) to 25% EBIT,” – says the company. Amazon is up more than 12% this year. Ad tech company The Trade Desk has a 5.5% upside to Morgan Stanley’s price target and another 21.4% AI-driven upside. “We believe AI can help TTD create more efficient and effective tools for its DSP [demand side platform] business, improving results for advertisers and increasing spend,” the company wrote. Shares of The Trade Desk are up 27% year to date. Finally, Shutterstock has a 13.2% upside to Morgan Stanley’s price target and the largest AI-driven upside at 38% “We see AI benefiting SSTK as it gets on growing EBITDA margins from growing computer vision revenues while bringing text-to-image AI capabilities to its platform,” the company said. A creative platform that provides products such as: which licenses photos, illustrations and videos to marketing agencies and media organizations, reported a drop in fourth-quarter profit and revenue last month. “Shutterstock has now fully integrated generative intelligence into our Creative Flow platform across all our products, sales channels, geographies. and languages, and we’ve built key partnerships in the AI ecosystem leveraging our vast content library,” CEO Paul Hennessy said in the earnings announcement. Stocks increased. 42% so far this year. — CNBC’s Jennifer Elias contributed reporting.