Citi Recognizes the Top Tech Winners in New A.I. Craze

Citi estimates that the addressable market for artificial intelligence might be in the tens of billions of dollars.

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This implies that the space offers players a ton of opportunities.

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In a recent report, analyst Tyler Radke stated, "The public introduction of OpenAI's ChatGPT unleashed an AI news frenzy, but is also driving considerable innovation, potentially creating new business opportunities and challenging long-held market dominance."

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Microsoft launched ChatGPT late last year, which integrates with its Edge browser and Bing search engine. The IT titan has made significant investments in the business.

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According to Radke, this has given Microsoft the first-mover advantage and put it in the strongest position to profit from the software industry. He sees several opportunities for the business to succeed in generative AI, including the opportunity to capture market share in search.

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“We believe 2023 will be crucial for Microsoft in terms of luring a sizable user base to its new AI-powered Bing search engine + Edge browser and eroding Google's incremental search ad market share,” he stated.

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In the near future, the popularity of ChatGPT might increase Microsoft's monthly active users. To realize the revenue possibilities from advertising, Radke observed, it will be essential for it to maintain its user base and increase engagement.

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Azure, Microsoft's cloud computing subsidiary, has the potential to develop thanks to AI. According to Radke, with a future base case of $1.4 billion yearly, its OpenAI service may increase Azure's fiscal year 2024 revenue by an additional $0.6 billion.

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His $282 price objective for the company entails a gain of about 4% over Monday's finish. In 2023 so far, Microsoft stock has increased by almost 13%.

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Google a ‘fast follower’

Bard, an AI rival from Alphabet, was launched last week. The stock fell 7% for the day as investors were dissatisfied. John Hennessy, the chairman of Alphabet, said on Monday that the business wanted to demonstrate that it possessed comparable technology even though it wasn't yet suitable for production use.

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Alphabet's reluctance in entering the contest is not being downplayed by Radke.

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However, he said, "We believe Google as a fast follower has the capabilities to deliver competing goods as we look for Bard functionality to increase pretty quickly. We expect Microsoft and its first mover advantage to drive hard here."

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Radke anticipates a more robust user experience across search judgments and products in light of Alphabet's developments in AI.

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His $120 price objective for Alphabet implies a potential gain of almost 27% from Monday's finish. Share prices have increased by over 7% so far in 2018.

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Opportunity in the GPU business

According to Radke, the market for graphics processing units may see a $4.5 billion opportunity as a result of AI search. As a result, businesses like Nvidia, which creates and produces GPUs with AI processing capability, will profit, he claimed.

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On Nvidia, he has a price objective of $210, which suggests a 6% decline from Monday's finish. The chip manufacturer is already up a staggering 55% for the year.