While enterprise software firms struggle to monetize creative artificial intelligence, cloud computing leaders Amazon.com (AMZN) is banking on the trend, says one analyst. Amazon stock rose on Friday.
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Reversals, hedges and chips. Oh my! Is the pullback over?
In the AI gold rush, Amazon is selling “picks and shovels” as the saying goes. And companies developing AI software and services may or may not strike it rich.
“This 19-month general AI hype cycle has delivered low revenue for most companies in the enterprise software industry, and we suspect that in the foreseeable future,” Brian White, an analyst at Mons Crespi Hardt, said in a client note on Friday. A lot will change.”
“On the other hand, leading cloud service providers have already begun to take advantage of TechZit Jest, including Amazon's AWS, and we expect this trend to usher in an even brighter future,” he said.
White said some enterprise software stocks have reached “frothy” levels amid an investor rotation out of semiconductor stocks. He did not name specific stocks, but predicted a “brisk selloff” in enterprise software shares ahead.
Amazon stock is a recent breakout.
Meanwhile, White reiterated his buy rating on Amazon stock with a 225 price target. In the stock market today, Amazon stock closed up 1.2 percent at 200.
Generative AI has “proven a revenue mirage for the enterprise software industry,” he said.
White's report comes just days after economist Ed Yardini warned of a bubble in AI stocks such as Nvidia (NVDA).
Last week, Jim Covello, head of global equity research at Goldman Sachs, said the economic benefits of AI have been overstated. In a report, Covello said investor sentiment on AI stocks could be negative.
White's report is the latest from a Wall Street official to throw cold water on the AI megatrend.
“Given the current stage of the general AI development cycle, we believe it's too early to make a bold bet in the enterprise software space,” White said. “Furthermore, we believe gen AI will be the only feature added to enterprise software, a capability that all vendors will offer, raising the stakes.”
Amazon stock is on two IBD lists: Leaderboard and SwingTrader.
On June 26, Amazon stock broke out of a flat base at a buy point of 191.70, according to the IBD MarketSurge chart. A 5% buy zone extends to 201.29 based on IBD trading principles.
Follow Patrick Seitz at X, first on Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.
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