Generative artificial intelligence (AI) is revolutionizing industries worldwide by using AI-powered generative models to produce text, images, and other media. This groundbreaking technology is not only benefiting major U.S. tech giants but has the potential to drive significant growth in the global software market, according to Morgan Stanley. In a recent note, the bank’s analysts led by Adam Wood highlighted that the automation capabilities of generative AI could expand global software spending by approximately $150 billion over the next three years.
Morgan Stanley’s assessment of the “winners in the AI era” in Europe includes a diverse range of companies, from software developers and internet operators to semiconductor players and IT service providers. The bank evaluated these stocks based on factors such as the complexity of their processes, the value and quality of their data, and their cloud revenue exposure. Among their top picks for “best positioned” stocks are German software and solutions provider SAP and French software developer Dassault Systèmes.
Morgan Stanley’s analysts also stated that they are overweight-rated on both SAP and Dassault Systèmes, raising their price targets in the note. For SAP, the bank now has a target of 150 euros ($157.85), suggesting a potential upside of approximately 23% from its October 4th closing price. Similarly, they set a target of 44.50 euros for Dassault Systèmes, indicating a potential upside of around 26%.
Regarding SAP, Morgan Stanley’s analysts believe the company will benefit from price increases in 2023 and improved product integration that will enable strong cross-selling. As for Dassault Systèmes, they praised its highly recurring software business models with growth potential, suggesting that the company deserves to trade at a premium compared to others in the sector.
In addition to SAP and Dassault Systèmes, Morgan Stanley also identifies Microsoft, Adobe, and Nvidia as solid investment plays in the generative AI trend. The use of generative AI enhances overall productivity by automating routine tasks like data reporting and alert summarization. This automation enables cybersecurity analysts to focus on more critical security concerns, heightening overall risk management capabilities.
Despite the significant potential of generative AI, Morgan Stanley acknowledges that the technology is still in its early stages. This assessment is based on data collected from recent funding activities and interviews with chief investment officers. However, as the technology continues to advance, it is expected to have an increasingly transformative impact on the workforce and industry landscape.
In conclusion, generative AI powered by AI-driven models is driving innovation and growth across various industries. The potential benefits of this technology are not limited to U.S. tech giants, as European companies such as SAP and Dassault Systèmes are also set to thrive. With the expanding global software market and the automation capabilities offered by generative AI, these companies are well-positioned to capitalize on the emerging opportunities in the AI era. Additionally, other major players like Microsoft, Adobe, and Nvidia are also poised to benefit from the growing adoption of generative AI. Although still in its early stages, generative AI shows significant promise for transforming industries and enhancing overall productivity in the years to come.