In this article, we will be taking a look at 10 generative AI stocks to watch amidst copyright concerns. To skip our detailed analysis of current developments in the generative AI space, you can go directly to see the 5 Generative AI Stocks To Watch Amidst Copyright Concerns.
The discourse surrounding generative AI has pervaded the investment community since the launch of ChatGPT in November 2022. Between then and now, generative AI has managed to stick around as a hot topic that every tech and AI enthusiast is interested in. As more people talked about it, the demand for generative AI products and software began to skyrocket, resulting in many tech companies jumping into the new craze in an attempt to offer their customers the best product in this space. As such, these companies have now become the leaders in this space and have continued to benefit from it throughout 2023. However, recent events show that the generative AI frenzy may go through a downturn after all this time.
Copyright Issues: An Early Risk
On July 10, CNBC reported that Hollywood writers and content creators have issued a hue and cry against major generative AI companies, Meta Platforms, Inc. (NASDAQ:META) and OpenAi, in particular. Their claim is that these companies have been involved in copyright infringement by using their content without permission to train their AI chatbots. Comedian Sarah Silverman, along with several other Hollywood writers, have announced that they are in the process of suing OpenAI and Meta Platforms, Inc. (NASDAQ:META) over this alleged copyright infringement. According to the report, this may be only the beginning of copyright infringement lawsuits leveled against not just these companies but other companies that are involved in this space as well.
Such developments may very well impact the future of other companies in this space as well, like Baidu, Inc. (NASDAQ:BIDU) and Alibaba Group Holding Limited (NYSE:BABA), two Chinese companies that have recently launched their own generative AI chatbots: the Ernie bot and Tongyi Qianwen, respectively. The investing community is thus keeping a close watch on further developments in this matter, with RBC analysts putting out the following statement:
“We’re also keeping our antenna up for data points like these representing downside risk relative to the current level of generative AI hype.”
How Big of A Threat Is This?
Despite these looming lawsuits and the possibility of more coming up in the future, several professionals see generative AI as something that is bound to continue succeeding in this market. In an interview with CNBC on July 6, Amazon.com, Inc. (NASDAQ:AMZN) CEO Andy Jassy said the following:
“To me, I see generative AI as one of the biggest technical transformations in our lifetime, and I think it has the ability to transform virtually every customer experience that we know.”
In another CNBC interview from the next day, Paul Meeks, Independent Solutions Wealth Management portfolio manager, also chipped in on this subject: Here’s what he said about the AI arms race:
“We’re in a hype cycle and all of the tech majors, including Amazon, will get to the substance before too long. Tech companies will distinguish themselves not by having AI – that’ll be everybody’s oxygen – but by the companies that actually don’t jump on this bandwagon.”
Meeks went on to compare the AI hype cycle with the 1990s dot-com bubble, stating that the main companies involved in that trend managed to exploit it and benefit, while other companies that didn’t manage to follow in their footsteps ceased to exist. Meeks expects a similar form of fallout during the AI hype cycle moving forward.
Considering the above opinions put forth by professionals in the field, the case that generative AI may struggle in the face of challenges, like the current copyright infringement issue, may not be as strong. However, financial professionals are still opting to keep their eyes and ears open to spot any downsides to the generative AI hype cycle. In light of this, we have compiled a list of generative AI stocks to watch at this moment.
Photo by Levart_Photographer on Unsplash
Our Methodology
We have selected stocks that are involved in the generative AI space through either their own software or chatbots or even other technology that is vitally supporting generative AI applications in different companies. We shortlisted the stocks by using Insider Monkey’s hedge fund data for the first quarter and then ranked them using their upside potential, mentioned on TipRanks as of July 11.
Generative AI Stocks To Watch Amidst Copyright Concerns
10. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 220
Upside Potential: 3.44%
Average Analyst Price Target: $304.21
Meta Platforms, Inc. (NASDAQ:META) is a communication services company based in Menlo Park, California. It has joined the generative AI space with its LLaMA model, a Large Language Model (LLM).
The stock should be watched closely in light of the looming copyright infringement lawsuit being filed against Meta Platforms, Inc. (NASDAQ:META), for allegedly using several Hollywood authors’ content to train its AI models.
There were 220 hedge funds long Meta Platforms, Inc. (NASDAQ:META) during the first quarter, with a total stake value of $25.1 billion.
Rosenblatt analyst Barton Crockett maintains a Buy rating on Meta Platforms, Inc. (NASDAQ:META) shares as of July 7. The analyst also raised the firm’s price target on the stock from $263 to $333.
ClearBridge Investments mentioned Meta Platforms, Inc. (NASDAQ:META) in its second-quarter 2023 investor letter:
“Delivering performance through fundamental, bottom-up stock selection has been a constant over our tenure managing the Strategy. We underperformed in the first half of 2022 from being too early in entering several stocks going through negative earnings revisions and have seen relative results rebound over the last 12 months due to better stock picking, especially among earnings reset names such as Netflix and Meta Platforms, Inc. (NASDAQ:META). Also within shadow tech, we added back to our weighting in Meta as steady advertising trends and continued cost management should lead to improved profitability.”
9. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 289
Upside Potential: 5.56%
Average Analyst Price Target: $350.29
Microsoft Corporation (NASDAQ:MSFT) was spotted in the 13F holdings of 289 hedge funds during the first quarter, with a total stake value of $57.9 billion.
As of July 6, Morgan Stanley analyst Keith Weiss holds an Overweight rating on Microsoft Corporation (NASDAQ:MSFT) shares. Weiss also raised his price target on the stock from $335 to $415.
Microsoft Corporation (NASDAQ:MSFT) is a large informational technology company based in Redmond, Washington.
The company’s investment ties to OpenAI and its own foray into the generative AI space with the Bing chatbot may leave it vulnerable in light of the recent lawsuit being filed against OpenAI and concerns of copyright infringement surrounding generative AI in particular.
ARK Investment Management was the largest shareholder in Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter, holding 58,969 shares in the company.
This is what ClearBridge Investments had to say about Microsoft Corporation (NASDAQ:MSFT) in its second-quarter 2023 investor letter:
“2023 has so far marked a return to mega cap leadership, with Apple, Microsoft Corporation (NASDAQ:MSFT), Alphabet, Amazon.com and Nvidia accounting for approximately two thirds of the benchmark return. At 41.3%, the five largest stocks in the market represent the highest concentration in the 26-year history of the Russell 1000 Growth Index. Among these names, we maintain overweights to Nvidia (+246 bps) and Amazon (+117 bps), underweights to Microsoft (-353 bps) and Apple.
The Strategy’s IT holdings also drove performance in the second quarter, led by the continued rerating of graphics chipmaker Nvidia as a key beneficiary of the generative AI boom. AI-connected holdings Microsoft and Amazon also delivered strong gains.”
Like Meta Platforms, Inc. (NASDAQ:META), Baidu, Inc. (NASDAQ:BIDU), and Alibaba Group Holding Limited (NYSE:BABA), Microsoft Corporation (NASDAQ:MSFT) is a generative AI stock to keep a close eye on in while the OpenAI and Meta Platforms, Inc. (NASDAQ:META) lawsuits progress.
8. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Upside Potential: 8.35%
Average Analyst Price Target: $126.63
Alphabet Inc. (NASDAQ:GOOG), another big tech company on our list, is holding its own in the generative AI space with LaMDA, which laid the groundwork for its ChatGPT rival chatbot, Bard. The company is based in Mountain View, California.
Our hedge fund data shows 155 funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter. Their total stake value in the company was $18.6 billion.
Justin Post at BofA holds a Buy rating on Alphabet Inc. (NASDAQ:GOOG) shares as of June 15, alongside a $128 price target.
Manole Capital Management made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2023 investor letter:
“Despite this, the S&P 500 is up 7% this year and the Nasdaq is up +11%. Technology rebounded from a challenging 2022 and many large tech companies are performing quite well this year. Through mid-May 2023, year-to-date performance of some of the most popular and largest names tech names is impressive. For tech companies with market capitalizations over $1 trillion, Apple is up +35%, Microsoft +33%, Amazon +39%, and Alphabet Inc. (NASDAQ:GOOG) is +40%. If you add in Nvdia, Google and Meta, you have three quarters of the entire S&P 500’s year-to-date return.
For our purposes, we are just going to focus on software digital wallets, as they are much more common and accessible. If you own an iPhone, then you have an Apple Pay pre-loaded digital wallet. If you have a Samsung phone, you have Samsung Pay available for use. Those two, along with Google Pay and PayPal, are the four most popular digital wallets today. According to the Payments Journal, PayPal has been used (over the last 12 months) by 62% of American consumers, followed by Apple Pay at 41% and Google Pay at 32%.
We are loyal Apple users (iPhones, iPads, iMac) and find their Apple Pay to be a convenient and safe digital wallet to use. It is currently accepted at more than 90% of US retailers, so it clearly has widespread adoption. Samsung and Google users also seem pleased with their preferred digital wallets. In our opinion, these new entrants are “a bit too late to the party” to make a meaningful dent versus established players.
As of today, both Apple Pay, Samsung Pay and Google Pay have a distinct advantage in the digital wallet arena. These three firms have spent billions of dollars ensuring that their apps are easy to use on their smartphones. Plus, and maybe more importantly, the consumer experience is embedded and native to the operating system. This ties their digital wallet to the device, which cannot be replicated.”
7. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 99
Upside Potential: 9.39%
Average Analyst Price Target: $542.94
Holding 1.9 million shares in the company, Citadel Investment Group was the most significant stakeholder in Adobe Inc. (NASDAQ:ADBE) at the end of the first quarter.
Adobe Inc. (NASDAQ:ADBE) is an application software company. It is based in San Jose, California.
The company’s links to generative AI lay with Firefly, which is Adobe Inc.’s (NASDAQ:ADBE) family of creative generative AI models. Its involvement in generative AI may leave the company vulnerable to allegations similar to those being leveled against OpenAI.
On June 21, Keith Bachman at BMO Capital upgraded shares of Adobe Inc. (NASDAQ:ADBE) from Market Perform to Outperform and announced a price target of $570 on the stock.
Adobe Inc. (NASDAQ:ADBE) was found in the portfolios of 99 hedge funds in the first quarter, with a total stake value of $7.3 billion.
Here’s what ClearBridge Investments had to say about Adobe Inc. (NASDAQ:ADBE) in its second-quarter 2023 investor letter:
“We increased our position in marketing and design software maker Adobe Inc. (NASDAQ:ADBE). The company is protecting its leadership position by moving quickly into generative AI and license protection. It developed Firefly into a product that can be monetized, moving AI from a previously perceived risk into an opportunity.”
Like Meta Platforms, Inc. (NASDAQ:META), Baidu, Inc. (NASDAQ:BIDU), and Alibaba Group Holding Limited (NYSE:BABA), Adobe Inc. (NASDAQ:ADBE) is a generative AI stock to watch in light of copyright issues.
6. Intuit Inc. (NASDAQ:INTU)
Number of Hedge Fund Holders: 86
Upside Potential: 9.55%
Average Analyst Price Target: $508.67
Mizuho analyst Siti Panigrahi reiterated a Buy rating on Intuit Inc. (NASDAQ:INTU) shares on June 16 while maintaining a price target of $550 on the stock.
This June, Intuit Inc. (NASDAQ:INTU) also threw in its cap with other generative AI companies by announcing a new generative AI intelligence software named GenOS.
Intuit Inc. (NASDAQ:INTU) is an application software company based in Mountain View, California.
In total, 86 hedge funds were long Intuit Inc. (NASDAQ:INTU) in the first quarter. Their total stake value was $5.3 billion.
ARK Investment Management was the most prominent shareholder in Intuit Inc. (NASDAQ:INTU) at the end of the first quarter, holding 71,541 shares in the company.
ClearBridge Investments made the following comment about Intuit Inc. (NASDAQ:INTU) in its second-quarter 2023 investor letter:
“Taking advantage of post-earnings weakness, we initiated a position in Intuit Inc. (NASDAQ:INTU), a provider of software for small business accounting and tax preparation under the QuickBooks and TurboTax brands as well as personal finance (Credit Karma) and marketing services (Mailchimp). We see a clear path to upside earnings revisions as the company expands new products that increase its total addressable market and drive average revenue per user growth.”
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Disclosure: None. 10 Generative AI Stocks To Watch Amidst Copyright Concerns is originally published on Insider Monkey.
