Goldman Sachs Suggests the ChatGPT Furore Could Last: Analyzing 4 Key Players in AI

There are plenty of reasons to be fearful when it comes to tech stock booms on Wall Street. Investors have had to suffer from many false dawns in the past, ranging from the dotcom bubble at the turn of the century to the recent difficulties experienced in sustaining enthusiasm for the metaverse. However, as generative AI sweeps the world, some market experts believe that it may amount to something bigger than a bubble.

The success of generative AI platforms like ChatGPT has contributed to a return of optimism to markets like the tech-heavy Nasdaq Composite, which soared more than 30% in the first half of the year following a challenging 2022 punctuated by severe economic headwinds.

It’s this significant growth, in the face of lingering headwinds like high inflation, that has set off alarm bells for some analysts, who recognize the parallels between the ongoing AI boom and that of the other bubbles that have infiltrated tech markets in recent years.

Goldman Sachs, however, believes that the generative AI rally may be here for good

Kash Rangan, software analyst at banking giants Goldman Sachs, claimed in an interview for their latest report that “AI may not be in the hype cycle yet. When technology providers agree that a technology shift is really happening, it's real. When customers become interested, it's not hype. Customers are interested.”

In April 2023, Goldman Sachs published an article claiming that its research team anticipates that generative AI could raise global GDP by as much as 7%, representing growth of almost $7 trillion.

In addition to this, the same research suggests that the technology could drive productivity growth by 1.5% over the next 10 years.

Such astonishing growth levels could have significant implications for a wide range of industries. “The field of artificial intelligence (AI) is growing rapidly and is expected to continue growing in the coming years,” explains Maxim Manturov, head of investment advice at Freedom Finance Europe.

“AI can transform a wide range of industries, from healthcare and finance to

transport and logistics. Investors may want to keep an eye on companies that are developing

innovative AI solutions or integrating AI into their existing operations.”

For investors, the far-reaching potential of AI has plenty of upside to tap into through strategic investments.

Although the likes of ChatGPT and parent company OpenAI aren’t publicly traded at present, there are many leading tech players with sufficient generative AI exposure that position themselves as excellent options for investors to hold should Goldman Sachs’ estimates of a prolonged boom period come to fruition.

With this in mind, let’s explore four of the generative AI stars of tomorrow that are available to buy into today:

1. Microsoft (NASDAQ: MSFT)

Although Microsoft isn’t exactly an up-and-coming player in the world of generative AI, the company has significant exposure to the industry, and we can already see that the firm has made impressive price movements throughout 2023.

Microsoft has invested heavily in OpenAI, and Morgan Stanley has recently labeled the tech giant as a ‘Top Pick’ with as much as 22% upside potential from current levels due to its advantageous position in the world of generative AI.

"Generative AI looks to significantly expand the scope of business processes able to be automated by software, and Microsoft stands best positioned in software to monetize that expansion, which accompanied with a still reasonable valuation makes Microsoft our Top Pick in large-cap software," explained Morgan Stanley's Keith Weiss.

2. NVIDIA (NASDAQ: NVDA)

As we can see from its price rallies throughout 2023, NVIDIA is another firm that’s already been benefiting from the rise of generative AI. As a graphics card maker, NVIDIA benefits from the rising demand for technology to support artificial intelligence.

According to CEO Jensen Huang, the company sees its future in the production of hardware to support AI. With NVIDIA’s value rising nearly 200% at the time of writing, some investors may worry about whether the firm’s lofty price is really sustainable, but with such an impressive repertoire of clients, the stock’s performance may be justified.

NVIDIA makes the world’s highest-performing microchips, and because of this, it’s currently likely that the company will power the generative AI platforms of tomorrow. Considering that the likes of Amazon and Oracle both rely on NVIDIA chips, the company may well position itself at the forefront of the AI charge.

3. Unity Software (NYSE: U)

June 2023 saw the value of Unity shares jump 15% as the company announced a range of new AI solutions, and speculative investors believe that this may just be the beginning for the company.

At present, Wall Street’s highest price targets for Unity see the company climbing to a share price of $66, representing a seismic rally for a stock that’s experienced more than its fair share of turbulence over the course of the year–despite settling at a price that’s still more than 50% ahead of its opening value.

4. Broadcom (NASDAQ: AVGO)

Broadcom is another example of a chipmaker with plenty of room for growth. In fact, the company has recently stated that it expects its AI-based sales to double in 2023 alone, despite other areas of the business slowing down.

Although some of Wall Street’s biggest players in generative AI aren’t intrinsically linked to the industry, it’s clear that the all-encompassing growth of artificial intelligence will rely on the wider tech industry to adapt to this brand-new frontier.

Should Goldman Sachs be correct in their assessment that the generative AI boom may not be a bubble after all, there will certainly be some key investment opportunities to hold in portfolios.