The future of artificial intelligence is looking very promising, with an estimated $6 trillion revenue opportunity within the internet industry. The AI market is expected to grow at a rapid pace, with some intelligence bodies predicting that the AI hardware and services market will reach $90 billion by 2025, up from $36 billion in 2020.
The rise in consumer AI adoption is driving an increase in digital behaviour, resulting in multi-year digital revenue growth and free cash flow across the industry. This growth is expected to continue as AI technology advances and improves.
Alphabet: More Revenue Increases Expected:
Alphabet, the parent company of Google, expects continuous growth driven by AI-based innovation on its platforms such as search, YouTube and other offerings. The company's sensitivity work shows that improvements through AI could result in a 10%+ increase in annual revenue for GOOGL ($50bn+) by 2025.
However, investors were not impressed when Google unveiled Bard, causing shares to drop 7% on the day of the event. Critics pointed out that Google was slow in responding to ChatGPT, but Google CEO, Sundar Pichai, has urged employees to test out Bard and reminded them that Google's most successful products were not always the first to market.
Despite the mixed reactions, the underlying technology of AI is rapidly evolving with tremendous potential, making this moment of AI-driven innovation uncomfortably exciting for the industry.
Nvidia: Overtaken Warren Buffett’s Berkshire Hathaway
Nvidia Corp's surge in the artificial intelligence market has propelled the chipmaker into the top league of S&P 500 heavyweights, rekindling confidence in big tech. The company's market value has surged by approximately $200 billion since the end of 2022, surpassing Berkshire Hathaway and Tesla to claim the fifth-highest weighting in the stock benchmark.
With a 1.7% market capitalization-weighted S&P 500, only Apple, Microsoft, Alphabet, and Amazon hold bigger sway. This milestone happens at an opportune moment for big tech as the group gains a renewed shine following the 2022 selloff. Data compiled by Bloomberg shows that the S&P 500 weighting of Apple, Microsoft, Alphabet, Amazon, Nvidia and Tesla has risen to 21% since bottoming on Jan. 5 at approximately 18%.
Despite this increase, it is still far from its peak of almost 26% in late 2021.
Amazon: The biggest beneficiary of AI’s effect on e-commerce
Amazon is poised to be the biggest beneficiary of the impact of artificial intelligence on e-commerce. Its share price is expected to rise by almost 10% due to the influence of AI. This growth is attributed to a faster-growing and more profitable e-commerce and public cloud business that could add up to 18%. As of now, Amazon's stock has risen over 12% since the start of the year.
Fullerton Markets Research Team
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