The recent surge in artificial intelligence (AI) stocks may have cooled off, but the news surrounding AI continues to make waves. This week, Amazon.com (AMZN) and Meta Platforms (META), the parent company of Facebook, were the highlights in AI news. However, investors are still keeping a close eye on the declining performance of AI stocks like Nvidia (NVDA) and Palantir (PLTR).
NVDA stock has seen a 191% increase in value in 2023, but it has recently retreated by 15% from its 52-week high of 502.66, which was set on August 24. Similarly, PLTR stock has also retreated by 23% from its own 52-week high.
A UBS report published on Thursday noted that tech stocks have been under pressure in September due to rising yields and mixed results. The Nasdaq 100 index is currently trading about 8% lower than its peak in July. However, the report suggests that this recent weakness could be a good opportunity to invest in AI leaders.
Cloud computing giants like Amazon Web Services and Microsoft have contributed to the demand for Nvidia computer chips for AI applications, thereby driving up the value of NVDA stock. Microsoft has a 49% stake in OpenAI, the leading company in generative AI, and also heavily invests in AI. Additionally, Amazon recently announced its investment of up to $4 billion in Anthropic, a rival of OpenAI, and will utilize Amazon’s cloud computing services.
The strategy going forward for companies like Amazon, Microsoft, and Google-parent Alphabet is to use AI startups to drive demand for their cloud services. Google has invested in Cohere, a company that builds large language models. These language models, known as LLMs, play a crucial role in the development of AI applications, as they aid in understanding the way humans write and speak.
Generative AI models can process prompts, such as internet search queries, and generate text, images, videos, and even computer programming code on their own. Industry-specific versions of generative AI are expected to use company data to further train AI models.
Meanwhile, Meta showcased its generative AI consumer chatbot strategy at its annual developer conference this week. The company introduced Meta AI, a generative AI tool, and AI Studio, a platform to assist developers in building AI chatbots for businesses advertising on Meta’s social media platforms. Meta also unveiled a new image generating model called Emu.
However, some analysts were not entirely satisfied with the event, pointing out the absence of AI business and merchant tools for WhatsApp and Messenger. Monetizing AI products has become a key issue for many AI stocks, although some companies, like Microsoft, have already made progress. Microsoft’s business AI assistant, Office 365 Copilot, will be priced at $30 per user monthly starting from November 1.
Other software companies, such as Salesforce, ServiceNow, Adobe, and Workday, are still exploring ways to monetize their AI products. Workday, in particular, discussed its AI strategy during an analyst day on September 27. While they currently offer incremental AI functionality within their existing products at no additional cost, they are open to potential price increases in the future as the value of new AI functionality is determined.
RBC Capital analyst Rishi Jaluria maintains a cautious view on AI stocks, expressing minimal expectations for direct generative AI revenue in 2024. Nonetheless, for companies like Microsoft, the outlook is more positive.
Note: The content has been rewritten in Serbian.