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You would never guess analysts’ top AI stock pick

You would never guess analysts' top AI stock pick
Elmaz Sabovic

The impact of artificial intelligence on the industry has revolutionized the stock market. Names like Nvidia (NASDAQ: NVDA) and SuperMicro (NASDAQ: SMCI) are now commonplace, with names like Micron (NASDAQ: MU) sparking interest among investors.

However, analysts have chosen Microsoft (NASDAQ: MSFT) as the company poised to gain the most from the generative AI trend in the coming years, rather than any of these other contenders.

Reasons for picking MSFT stock

Jefferies has identified Microsoft as the leading beneficiary of the GenAI cycle. According to analysts, Microsoft is well-positioned to capitalize on opportunities in both infrastructure (such as Azure OpenAI) and applications (with a series of Copilots), enabling it to harness the full potential of this transformative shift.

Furthermore, they have reaffirmed their confidence in Microsoft as a franchise pick and have revised their price target for the stock upward from $465 to $550. This reflects their optimistic outlook on Microsoft’s ability to leverage the advancements in artificial intelligence effectively.

Apart from its significant investments in OpenAI, the creator of ChatGPT, Microsoft is actively expanding its investment portfolio to encompass various facets of Generative AI. 
Most notably, Microsoft recently invested $15 million in Mistral AI, a European AI company that mirrors the capabilities of OpenAI. This move reflects Microsoft’s commitment to diversifying its investments and staying at the forefront of the rapidly evolving field of artificial intelligence.

Microsoft's investments in generative AI. Source: Ed Valdez
Microsoft’s investments in generative AI. Source: Ed Valdez

Other stocks that will benefit from GenAI

Furthermore, the brokerage firm highlights Alphabet (NASDAQ: GOOGL) as a significant AI frontrunner. They point to the company’s advanced AI capabilities, extensive and dedicated user base, and unique access to real-time data from both Search and YouTube

This viewpoint persists despite worries that generative AI could potentially challenge Google’s core search business in the long run.

Jefferies is notably optimistic about Amazon (NASDAQ: AMZN), especially following its recent announcement of its largest investment in three decades, specifically geared towards AI. This move involves a significant $2.75 billion investment in the artificial intelligence startup Anthropic, marking its largest venture deal to date. 

Other notable selections by analysts are Meta Platforms (NASDAQ: META), and CrowdStrike (NASDAQ: CRWD), identified as major beneficiaries of the current AI cycle, alongside several other companies.

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