ChatGPT ignited an A.I. craze. What it means for tech companies and who's best positioned to benefit
Since the launch of ChatGPT late last year, no one in the tech world can seem to stop talking about artificial intelligence. The conversational chatbot operated by Microsoft -backed OpenAI busted onto the scene late last year, garnering 1 million users within its first week on the market. Those tailwinds continued into 2023, with a multiyear and multibillion-dollar investment from tech and software giant Microsoft. And UBS and Similar Web project the platform surpassed 100 million monthly active users in January. The push into AI comes at a time when technology companies are looking to reinvent themselves — and their businesses — after surging inflation, Federal Reserve rate hikes and a murky macro environment brought an end to more than a decade of seemingly endless growth and led to the worst year for stocks since 2008 . MSFT mountain 2022-11-30 Microsoft’s performance since ChatGPT’s rollout One of the biggest questions swirling since ChatGPT’s launch is whether the platform could counter Google ‘s search dominance. While it’s too early to rule it a viable threat, it could weigh on the company’s profitability by forcing Alphabet to roll out its own version earlier than expected, said Morgan Stanley analyst Brian Nowak in a January note. It’s safe to say, Alphabet is sweating. CEO Sundar Pichai announced Thursday that the company will launch its LaMDA language model and new AI features “very soon .” Just weeks before, he said moving too fast on AI-chat technology could hurt Alphabet’s reputation . CNBC reported Tuesday that Google is already testing some of these features among employees as part of a plan to clap back against ChatGPT. But it’s not just technology companies rethinking AI. Across sectors, companies are considering how they can use it to improve efficiency, collect data and even cut costs. A FactSet review of earnings conference call transcripts, found combinations of the phrase mentioned by oil giants, power tools manufacturers, banks and even industrial behemoth Caterpillar , among others. GOOGL YTD mountain Alphabet shares have so far surged nearly 19% in 2023 The launch of ChatGPT serves as a reawakening for a tech world focused long-term on AI, but grappling near-term with growth concerns. AI could offer a new frontier. “Those companies, which we believe includes Microsoft, with the best, brightest, and most creative minds plus access to the broadest range of curated data are likely to gain the biggest advantage from AI,” wrote Bernstein’s Mark Moerdler in note. “The rest of the world will deliver good but not great solutions.” We combed through earnings transcripts available through FactSet to find out what some of the biggest tech companies are saying about the latest craze and who could benefit the most. Preparing for an ‘AI arms race’ in tech There’s no question that Microsoft stands to gain from ChatGPT and the AI push on Wall Street. The company’s recent multiyear, multibillion investment in OpenAI , comes on top of two previous rounds in 2019 and 2021. On an earnings call last month, Microsoft CEO Satya Nadella called AI the “next big platform wave” that will impact, improve and expand opportunities for the company’s technology slate. And, despite weak performance in the U.S. during the period, Chief Financial Officer Amy Hood said that AI was one of the areas that experienced share gains. “The age of AI is upon us, and Microsoft is powering it,” Nadella said on the call, which mentioned the term AI at least 40 times, according to a CNBC analysis . “We are witnessing nonlinear improvements in capability of foundation models, which we are making available as platforms,” he added. “And as customers select their cloud providers and invest in new workloads, we are well positioned to capture that opportunity as a leader in AI.” MoffettNathanson analyst Sterling Auty estimated that technology from OpenAI could benefit tools accounting for as much as 76% of the Microsoft’s aggregate revenue, while JMP’s Andrew Boone noted that ChatGPT could improve the company’s Bing search engine. Despite Microsoft’s current advantage, “it seems too early to call winners in the other categories,” Barclays analyst Raimo Lenschow said in a Friday note, in part because ChatGPT only “scratches the surface” of the endless use cases for AI. Availability of the technology among other big cloud and information services providers should ignite an “AI arms race” in the field, according to Bernstein’s Moerdler. For Oppenheimer’s Timothy Horan, Amazon’s AWS segment stands to benefit from integrating AI and machine learning into data collection and management procedures, he said in a note to clients. In his now-famous efficiency speech , even Meta Platforms CEO Mark Zuckerberg highlighted the use of AI in improving engineer productivity and showing relevant content to users. AI tools also brought advertisers 20% more conversions over the previous year. META YTD mountain Meta Platforms shares have rallied more 55% so far this year after tumbling 64% in 2022 Meanwhile, Apple CEO Tim Cook noted its most recent AI use cases like crash and fall detection, along with the ECG feature on its smartwatches and iPhones during an earnings call Thursday. “I mean these things have literally saved people’s lives, and, so we see an enormous potential in the space to affect virtually everything we do,” he said. Investments in AI and machine learning should serve as a multiyear catalyst for both Meta Platforms and Alphabet, said Bank of America analyst Just Post in a December note. Outside of Big Tech, travel and transportation companies like Airbnb , Booking Holdings and Uber stand to benefit from AI tools that can improve and target search, protect against fraud, predict demand and increase customer loyalty, he said. Semi stocks and push into AI As the foundation of all things digital, beaten-up chipmakers symbolize another area of the market poised to capitalize on tech’s latest AI push. Just this week, Qualcomm CEO Cristiano Amon highlighted the company’s first-ever AI-powered camera processor chip. Advanced Micro Devices CEO Lisa Su told analysts that she sees AI as one of the largest growth opportunities for the company over the next few years, highlighting its AI-focused chips like MI300 and Ryzen 7000. “We believe that AI is a huge driver of compute growth, and given our portfolio, it should be a driver of our growth as well,” she said, adding that analysts can expect more “AI acceleration” within its server portfolio. In a January note to clients, Wells Fargo analyst Aaron Rakers singled out Nvidia and Arista Networks as beneficiaries of the next AI wave. “We think NVDA will be the derivative focus from this, though we would also view this as a broader positive for semis and would reiterate our positive view on ANET’s positioning for AI fabric build-out,” he wrote. For years now, Nvidia has invested in AI software programming, got a slew of its graphic chips used in video games and other applications, and that’s garnered the attention of many on Wall Street, including Altimeter Capital’s Brad Gerstner, who revealed a stake in Nvidia on CNBC’s “Halftime Report ” Thursday. “We’ve long admired Nvidia, its leader Jensen [Huang] and the central role that they play in AI,” he said. “Over the course of the last two years, we’ve seen a massive acceleration, evidenced by OpenAI and the work that Microsoft is doing, what Google is doing, etc.” — CNBC’s Michael Bloom contributed reporting
