Legacy tech companies, typically associated with traditional products and services, are experiencing a remarkable surge in stock values due to their involvement in the nascent field of artificial intelligence (AI). Companies like International Business Machines Corp. (IBM), Oracle Corp., and Dell Technologies Inc. have seen their stock prices increase by 17% to 49% this year, outperforming the Bloomberg Magnificent 7 Index that tracks prominent tech stocks.
These companies have incorporated AI into their broader business operations while still heavily relying on their traditional profit-generating products. By recognizing the potential of AI, they have leveraged its boom by enhancing their cloud servers to accommodate the increased space and energy requirements of AI tools.
“Each of these companies has, if not a unique AI angle, then at least a specific AI angle,” explained Hilary Frisch, a senior research analyst at ClearBridge Investments. The stock performance of these companies reflects investors’ confidence in their ability to achieve sustainable growth through AI.
IBM, for instance, successfully retooled its AI product Watson to adapt to the new era of generative AI. Renamed as WatsonX, the business of Watson doubled from the third to the fourth quarter, with executives forecasting strong growth ahead.
Similarly, Oracle witnessed a surge in demand for generative AI cloud services, and Dell reported a 40% increase in customer orders for AI-optimized servers. Both companies are optimistic about the future potential of AI and the untapped opportunities it presents.
Although AI has been around in some form for years, it gained significant attention after OpenAI Global LLC unveiled ChatGPT in November 2022. This new generation of AI models, like ChatGPT, can generate content in more sophisticated ways, leading to predictions that generative AI will reshape society and influence various industries.
Companies like OpenAI, Nvidia Corp., Super Micro Computer Inc., Microsoft Corp., and Alphabet Inc. have become leaders of the AI boom. OpenAI and Nvidia, in particular, have witnessed substantial increases in their stock values due to their development of large-language models that power generative AI.
Investment analysts have different views regarding the best way to invest in AI. Some, like Ivana Delevska, the chief investment officer at SPEAR Invest, prefer pure-play companies like Nvidia. On the other hand, some analysts argue that legacy companies are quickly catching up and have significant growth potential.
KeyBanc Capital Markets, for example, recently re-initiated coverage of Oracle with a “buy” rating, while Argus Research turned positive on the stock, citing strong results. Dell is currently analysts’ top pick, with 16 out of 20 recommending clients to buy the company’s shares.
While IBM may be viewed less favorably by some analysts, it remains a formidable player in the AI sector. The company has a rich history of adaptation, evolving from electric keypunch cards to mainframe computers, to its latest version of Watson. IBM is confident in AI’s potential to such an extent that it is not even filling vacant positions that could be performed by the technology itself.
In conclusion, legacy tech companies are capitalizing on the AI boom by integrating AI into their existing business models. While some investors prefer pure-play AI companies, others recognize the growth potential of these legacy tech giants. The rise of AI presents new opportunities and challenges for these companies, and their stock performance reflects the market’s anticipation of sustained growth in the AI era.
FAQs
1. What are legacy tech companies?
Legacy tech companies are well-established companies that have a long history of providing traditional products and services in the tech industry.
2. What is artificial intelligence (AI)?
Artificial intelligence refers to the development of computer systems that can perform tasks that typically require human intelligence, such as visual perception, speech recognition, and decision-making.
3. What is generative AI?
Generative AI refers to a new generation of AI models that can generate their own content and exhibit more sophisticated abilities beyond recognizing patterns and performing basic tasks.
4. What are large-language models (LLMs)?
Large-language models are AI models that have been trained on vast amounts of textual data and can generate human-like text.
Sources:
– [Bloomberg](https://www.bloomberg.com/)
Legacy tech companies, such as IBM, Oracle, and Dell, are experiencing a surge in stock values as a result of their involvement in the field of artificial intelligence (AI). These companies have recognized the potential of AI and have incorporated it into their business operations while still relying on their traditional products. This integration of AI has allowed them to enhance their cloud servers to accommodate the increased space and energy requirements of AI tools.
Investors are confident in the ability of these legacy tech companies to achieve sustainable growth through AI, as reflected in the increase in their stock prices. For example, IBM successfully retooled its AI product Watson to adapt to generative AI, and its business doubled in the fourth quarter. Oracle witnessed a surge in demand for generative AI cloud services, while Dell reported a 40% increase in customer orders for AI-optimized servers. Both companies are optimistic about the future potential of AI and the opportunities it presents.
Although AI has been around for some time, it gained significant attention after the unveiling of ChatGPT by OpenAI Global LLC. This new generation of AI models has the ability to generate content in more sophisticated ways, leading to predictions that generative AI will reshape society and influence various industries.
Companies like OpenAI, Nvidia, Super Micro Computer, Microsoft, and Alphabet have emerged as leaders in the AI boom. OpenAI and Nvidia, in particular, have seen substantial increases in their stock values due to their development of large-language models that power generative AI.
Investment analysts have different views on how to invest in AI. Some prefer pure-play companies like Nvidia, while others argue that legacy tech companies are quickly catching up and have significant growth potential. KeyBanc Capital Markets recently re-initiated coverage of Oracle with a “buy” rating, while Argus Research turned positive on the stock, citing strong results. Dell is also recommended by analysts, with 16 out of 20 recommending clients to buy the company’s shares.
IBM, although viewed less favorably by some analysts, remains a formidable player in the AI sector. The company has a history of adaptation and evolution and is confident in AI’s potential to the extent that it is not filling vacant positions that could be performed by the technology itself.
In conclusion, legacy tech companies are capitalizing on the AI boom by integrating AI into their existing business models. The rise of AI presents new opportunities and challenges for these companies, and their stock performance reflects the market’s anticipation of sustained growth in the AI era.
Sources:
– Bloomberg (link)
The source of the article is from the blog revistatenerife.com