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There’s no question that hype has been in the driver’s seat for the broader basket of top artificial intelligence (AI) stocks. Undoubtedly, we’re fresh off one of the worst technology-centered sell-offs since the dot-com bust. As such, it’s not hard to imagine some investors are likely to remain somewhat skeptical about getting on the back of a new momentum-driven trend.
Though AI has fueled quite a bit of valuation multiple expansion across a large number of names that still face considerable macro headwinds, I don’t think you can consider mega-cap AI stocks as a bubble about to burst. Some mega-cap technology names may be on the expensive side, but a lot of them have still yet to hit new highs.
Therefore, let’s check in with TipRanks’ Comparison Tool to tune into three powerful tech giants that could leverage AI to increase their dominance.
ChatGPT was the AI product that sparked the wave of AI enthusiasm back in late 2022. Microsoft’s stake in ChatGPT-maker OpenAI made Microsoft an early “go-to” stock to get one’s AI exposure. In recent quarters, Microsoft has really doubled down on AI by committing to bringing chatbot tech to its broader basket of software offerings.
Indeed, generative AI has become a must-add enhancer or “sweetener” for almost every tech firm these days, and that’s largely thanks to Microsoft. As the company moves forward with its AI rollout, I believe investors are right to forgive nearer-term macro-related headwinds for the longer-term growth runway paved by AI. The road ahead will be bumpy, but I believe it’s still worth staying on the ride. As such, I remain bullish on MSFT stock.
Though I do not doubt Microsoft’s AI prowess (it’s really one of the mega-cap AI pioneers), one must never lose track of the valuation. After Microsoft stock’s AI-assisted 53% surge off its November lows, the price of admission has gone in a hurry. Sure, AI excitement may have gotten a bit ahead of itself. However, I find it hard to believe that we’ll see the stock trading at pre-ChatGPT levels (think the mid-20 times earnings range).
Generative AI has the potential to be transformative, even for multi-trillion-dollar tech companies. At this juncture, AI’s impact on the growth of a company like Microsoft still seems difficult to fathom. If Microsoft can get AI right (regulation and all), it stands to win a lot. Arguably, Microsoft’s track record of seizing opportunities from…
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