Looking to bet on artificial intelligence? Bernstein thinks the two best stocks to do so are Microsoft and Adobe. “Within our coverage, MSFT , and ADOBE are best positioned to profitably leverage GenAI, as they control a big portion of their AI tech stack,” wrote analyst Mark Moerdler in a Tuesday note. “On the other hand, we think vendors that are using off-the-shelf GenAI models/capabilities would face tougher economics to scale AI offering, even though Gen AI could be profitable if the offering is differentiated and therefore usage can be profitably monetized,” he added. Both Microsoft and Adobe have benefitted in 2023 from enthusiasm around AI and its growing addressable market in the wake of ChatGPT’s debut. They’ve also received a boost from investors rotating back into the beaten-down technology sector. Both stocks have gained about 84% and 58%, respectively, for the year. Earlier this year, Microsoft debuted its Copilot, which brings AI capabilities to its Office suite for $30 a month . The company also announced a multibillion-dollar investment in ChatGPT-maker OpenAI at the start of the year. MSFT YTD mountain Microsoft shares year to date Moerdler estimates that the flat fee structure for Copilot could yield a 50% gross margin, while owning its vertical stack poses a key competitive advantage. “While the $30/month price tag generates handsome profit for Microsoft, it might be hardly profitable for others who have to rent model as a service,” he wrote. — CNBC’s Michael Bloom contributed reporting
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These software names are best situated to ‘profitably leverage GenAI,’ says Bernstein
