It has been a year to remember for the Big Tech brigade. Fueled by investors’ insatiable appetite for all things AI, the group dubbed the Magnificent 7 have been responsible for a big chunk of the stock market gains.
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But with 2023 about to come to an end, it’s time to assess these names’ prospects for the upcoming year. And for Needham’s Laura Martin one ranks above all the others.
“Alphabet (GOOGL) is our favorite name in Big Tech for 2024,” said the analyst, “because we expect auto, M&E (film & TV), and travel ad spending to rebound, plus political ad spending to add new dollars y/y, and also because GOOGL has said it will finally begin to deprecate cookies in Chrome beginning in 1Q24, which may disrupt ad spending across the rest of the digital advertising landscape in 2024 (which occurred when AAPL implemented a similar change in 4Q20), but not at GOOGL.”
In Martin’s view, amongst the FAANG family, GOOGL just pips Amazon for top dog status, with both set to benefit the most from GenAI. Along with Microsoft, over the long-term, all 3 cloud firms represent the next generation of “innovation platforms” (AAPL has the biggest one right now), as they boast the most important LLMs (large language models).
These three companies will eventually gain a portion of revenues from each newly developed application using GenAI, which is expected to replace 20-30% of full-time equivalent positions (FTEs) with automation across various industries.
Looking at the bigger picture, as per Martin’s sources, the EU is set to regulate GenAI in 2024. Consequently, she anticipates that U.S. companies adopting GenAI to reduce their cost structures will have the ability to capture market share from EU competitors, as these U.S. companies can pass on the cost savings to EU consumers, offering lower prices.
Moreover, the internet’s disruptive impact primarily favored U.S. companies, and Martin expects a similar trend with GenAI. As of 2022, the U.S. constituted just 4% of the global population but contributed to 20% of the worldwide GDP. “We believe GenAI will make the US even more productive vs peers,” she summed up.
All told, Martin maintained a Buy rating on GOOGL shares, while her $160 price target suggests shares will post growth of 14% over the next year. (To watch Martin’s track record, click here)
Amongst Martin’s colleagues, 6 remain on the sidelines but 26 others join her in the bull camp, all coalescing to a Strong Buy consensus rating. Going by the $154.10 average target, the stock will deliver returns of 10% in a year’s time. (See GOOGL stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
