The ‘Big Tech AI Wars’ Are Coming. Public Cloud Stocks Stand to Gain. – Barron’s

Text size

No one knows which publicly traded companies will score by bringing commercial artificial intelligence products to market, but an analyst at MKM Partners believes he has already found some near-term winners: public cloud players such as Amazon Web Services.

Analyst Rohit Kulkarni wrote in a research note Tuesday that he has been deeply researching AI over the past month. Over the past few weeks, he said, he has also watched Teslas (ticker: TSLA) AI day demo video and tried Meta Platforms (META) Make-A-Video and Googles Phenaki. The latter two projects can generate videos from text.

We are quite convinced that we are on the cusp of accelerating Big Tech AI Wars, however, it is unclear who holds the early edge as far as commercial success is concerned, Kulkarni wrote. Moreover, we are quite certain aboutone thing: commercial rollout of AI apps requires significant storage and computing resources, thus public cloud vendors could benefit from a strong usage tailwind over the next several years.

Amazon Web Services, Microsoft (MSFT)s Azure, and Google Cloud Platform are among the leading cloud services providers.

Kulkarni has Buy ratings on Googles parent Alphabet (GOOGL), Amazon.com (AMZN), and Meta, with price targets of $140, $170, and $240, respectively. He believes AI innovations in the past 18 months have shifted from contextual search, chatbots, and auto-complete tech to AI-generated content.

All in, we think the advent of personalized AI content is a significant step for Internet, likely bigger than AI-driven content recommendations, he writes. Unlike TikTok, which pulls the best content for you, AI apps can now generate the best content for you, at a fairly minimal incremental cost.

He notes that such apps have high storage and computational requirements. For example, he thinks Metas investments in its AI ambitions are likely to have added between $3 billion and $5 billion to its capital spending for 2022.

Write to Connor Smith at connor.smith@barrons.com

Read the rest here:

The 'Big Tech AI Wars' Are Coming. Public Cloud Stocks Stand to Gain. - Barron's