Wall Street analysts named several stocks this week they see as major beneficiaries of the recent artificial intelligence boom. While these companies are primarily concentrated in the tech sector, A.I. is touching other industries as well — including health care. Questions around the technology remain, but Morgan Stanley said “the hype behind AI is real.” CNBC Pro combed through the top Wall Street research to find stocks well-positioned in the A.I. race. They include Adobe, Marvell, RadNet, Cisco, TSM and Broadcom. Marvell Benchmark analyst Cody Acree thinks now’s the time time buy shares of Marvell. The semiconductor solutions company unveiled a mostly mixed fourth-quarter earnings report earliert this month, but Acree thinks the stock has room to run. “A Strong Play for AI/ML (artificial intelligence/machine learning) leverage with Data Center, Enterprise, & Carrier Infrastructure Leadership,” he said. Acree wrote that the company is “well positioned with multiple company-specific drivers” to participate in adoption of artificial intelligence. The firm is particularly bullish on the long-term growth of Marvell’s Data Center solutions division, which provides critical cloud infrastructure. “We are seeing Data Center customers prioritizing key growth areas such as AI and ML with potentially much larger investment over the next few years,” he said. To be sure, Acree acknowledged some near-term challenges that Marvell and others in the space face, but added that the company’s growth outlook remains bright. “Accordingly, we would use any share price weakness as an opportunity to build positions and we reiterate our Buy rating and our $70 Price Target,” he went on to say. Marvell shares are up over 4% this year. RadNet The outpatient radiology diagnostic center company was recently upgraded to outperform from market perform by Raymond James analyst John Ransom. Ransom said RadNet has “enhanced AI visibility & a promising 2023 outlook” following RadNet’s fourth-quarter earnings report. Specifically, RadNet uses artificial intelligence with its Enhanced Breast Cancer Detection mammography tool, also known as EBCD. “With strong structural tailwinds, MSD-HSD EBITDA growth should be achievable in the near to intermediate-term, with an enticing opportunity in the AI segment,” Ransom said. The company expects this program “to generate the majority” of the AI segment’s 2023 revenue, the analyst noted. Ransom, who has a price target of $30 per share, said the stock’s valuation is reasonable at current levels. “With labor and reimbursement headwinds mostly behind us, we believe investors will grow increasingly comfortable with the name given a favorable demand backdrop, solid core business, and AI segment that is gaining momentum,” Ransom wrote. RadNet shares are up over 24% this year. Taiwan Semiconductor Taiwan Semiconductor is a major beneficiary of artificial intelligence, according to Credit Suisse. TSM has several businesses including automotive, internet of things and smartphone, but it’s the company’s high-performance computing division that investors should take notice of, analyst Randy Abrams said. “AI to drive further inflection in TSMC’s high-performance computing business,” he wrote. The firm said HPC is TSM’s strongest growth driver. HPC focuses on emerging AI and 5G applications such as connected devices, smart cars and virtual/augmented reality. “AI has the potential to be a re-rating catalyst for TSMC after de-rating from 25-30x peak levels in 2020-21 to current 14x P/E and discount to SOX trading at 17x P/E on its ability to capture high share of the fastest growth driver in semiconductors,” Abrams said. Shares of the company are up 14% this year, and Abrams has a price target of $580 per share. “We now view the company poised for continued growth from an inflection in AI use cases to help it maintain this categories’ 20%+ growth CAGR through 2025,” he added. Marvell- Benchmark, buy rating “A Strong Play for AI/ML Leverage, with Data Center, Enterprise, & Carrier Infrastructure Leadership. … .we believe Marvell is well positioned with multiple company-specific drivers. … ..We are seeing Data Center customers prioritizing key growth areas such as AI and ML with potentially much larger investment over the next few years. … .Accordingly, we would use any share price weakness as an opportunity to build positions and we reiterate our Buy rating and our $70 Price Target.” RadNet- Raymond James, outperform rating “Enhanced AI Visibility, Promising 2023 outlook. … With strong structural tailwinds, MSD-HSD EBITDA growth should be achievable in the near to intermediate-term, with an enticing opportunity in the AI segment. … Mgmt provided incremental color on the AI segment, with the EBCD program expected to generate the majority of the segment’s 2023 revenue … With labor & reimbursement headwinds mostly behind us, we believe investors will grow increasingly comfortable with the name given a favorable demand backdrop, solid core business, & AI segment that is gaining momentum.” Broadcom- Bernstein, outperform rating “Investors have been going crazy for AI stories lately. However, we do not believe AVGO has been on that radar screen. But they joined the fray [recently], highlighting what appears to be substantial upside from recent excitement around generative AI at their hyperscale customers, noting their ethernet switch offerings into the space likely growing from ~$200M in FY22 to ~$800M this year & their compute offload revenues growing by an additional billion dollars…” TSM- Credit Suisse, outperform rating “AI to drive further inflection in TSMC’s high-performance computing business. … HPC is TSM’s strongest growth driver. … AI has the potential to be a re-rating catalyst for TSM after de-rating from 25-30x peak levels in 2020-21 to current 14x P/E & discount to SOX trading at 17x P/E on its ability to capture high share of the fastest growth driver in semiconductors. … We now view the company poised for continued growth from an inflection in AI use cases to help it maintain this categories’ 20%+ growth CAGR through 2025.” Adobe- Deutsche Bank, buy rating “We believe generative AI will be a powerful tool in the belt of creative professionals, communicators, and consumers going forward, enabling Adobe to more deeply penetrate its existing TAM by making Adobe products not just essential to creative pros, but to further involve other stakeholders in the content-creation process.” Cisco- Evercore ISI, Outperform rating “We think the $35B+ switching market remains one of the fastest growing segments of networking spend , as we expect the cloud switching market to grow at a 11%+ CAGR with a potential for further upside as AI centric workloads become omnipresent beyond hyperscale to enterprise customers. … Despite the challenges, CSCO retains the leading position in the switching market with a dominant position in the enterprise market.”
