In the latest quarter, publicly-traded companies faced a market message demanding that they harness the power of generative AI in order to grow faster. Four technology giants, Apple, Intel, Meta, and Microsoft, saw their post-earnings stock prices fluctuate based on how well they responded to this demand. Apple saw a positive change in its stock price due to a boost in services revenue offsetting a drop in iPhone sales in China, while hopes for future iPhone sales fueled by Apple Intelligence kept the stock from falling. On the other hand, Intel saw a significant decrease in stock price as it fell short of expectations and announced a 15% headcount reduction, with hopes of a rebound resting on AI chips for PCs and laptops.
Meta stood out among these companies with a positive stock price change, thanks to its innovative use of AI to help digital ad buyers sell more. Additionally, investments in AI-powered products like Meta AI presented the potential for further growth. Microsoft, while beating revenue and profit expectations, fell short on Azure growth and faced challenges with its AI Copilot product, while a pharma company’s feedback on Office 365 Copilot highlighted concerns about value for the price. These factors demonstrate the importance of a company’s AI strategy in influencing investor rewards.
To assess the potential for generative AI investment, author Brain Rush suggests four tests. These tests include evaluating whether a company leads its industry and can sustain that lead, if its products solve important problems well enough for customers to pay for them, whether it expects to grow faster than forecasted, and if its share price has risen faster than the market. Meta largely passes these tests, while Intel falls short in all four areas, struggling to compete in the GPU market despite some customer purchases of CPUs.
Microsoft’s AI strategy showed mixed results, with solid market share in cloud services but challenges in selling its AI product Copilot. Apple also had mixed results, with strong market share in the US smartphone market but struggles in China. The company’s high profits and potential for AI to boost iPhone sales remain hopeful signs for investors. Ultimately, investors should analyze companies based on these tests to determine their investment potential, with Meta showing promising prospects, and other companies in the generative AI industry also offering significant upside potential.
