RBC Capital has made several predictions about how artificial intelligence will evolve. In turn, the analyst firm created a list of companies that stand to benefit from the generative AI boom.
What To Know: Analysts at RBC anticipate companies that fail to embrace generative AI will see their multiples compress by more than 50% over the next five years, according to a Barron's report.
RBC expects accelerated adoption of AI to spark enhanced growth in cloud names and create a new wave of startups focused on AI.
The analyst firm also anticipates increasingly complex cyber attacks as malicious actors use generative AI to sharpen the teeth of their threats and cyber security companies stand to benefit.
RBC analysts separated AI beneficiaries into four categories: market leaders, vertical software leaders, mid-market challengers and generative AI enablers.
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The Breakdown: Market leaders that have advantages around data and distribution include Microsoft Corp MSFT and Salesforce Inc CRM.
RBC also believes that investors can play the AI acceleration through internet companies such as Alphabet Inc GOOGGOOGL, Amazon.com, Inc. AMZN, Meta Platforms Inc META, Snap Inc SNAP and Pinterest Inc PINS.
RBC expects Amazon to start publicizing its progress on generative AI. The firm noted Amazon has had AI integrated in cloud for much longer than Microsoft or Google. Meta offers generative AI tools that drive cost savings for advertisers, RBC added.
Vertical software companies stand to benefit as well. Companies like Veeva Systems Inc VEEV and Guidewire Software Inc GWRE offer significant data pools and have the ability to verticalize generative AI solutions, RBC said.
Then there are the mid-market challengers like HubSpot Inc HUBS and MongoDB Inc MDB that can narrow the gap between enterprise software companies by using generative AI to accelerate functionality.
RBC closes the loop with companies that enable generative AI and Microsoft is the only company that really stands out in this category. The analysts expect Microsoft to generate approximately $600 million in annual recurring revenue in the coming quarter, primarily from its investment in OpenAI's ChatGPT.
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