2024 is year AI 'starts to hit the mainstream': Analyst
Market hopes riding on Big Tech's fourth-quarter earnings results to set the tone for 2024. TECHnalysis Research, LLC President and Chief Analyst Bob O'Donnell breaks down several top tech stocks that will be in focus over the coming weeks, including companies betting big on AI this year.
"The bottom line is I think we'll start to see a few other companies besides Nvidia (NVDA) start to talk about some of that pipeline type of business," O'Donnell tells Yahoo Finance. "And, again, it's going to be broad-based because the thing about AI is... you've got the chips that drive it, you've got the software and services that enable it, and there's companies who also do the implementation services."
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
SEANA SMITH: Joining us now is Bob O'Donnell, TECHnalysis Research LLC president and chief analyst. Bob, it's great to have you here. So put this all in perspective for us. We certainly have a lot of optimism heading into this week. Is there one earnings report that you see on deck for tech that could really make or break the recent gains that we've seen?
BOB O'DONNELL: Well, hey, Seana, thanks. And thanks for having me. You know, I don't know that there's a single one because the beauty of the momentum that we're seeing around AI is the fact that it is relatively spread out. Obviously, NVIDIA is the one case that everybody tends to point to. But I mean, look what we saw with Microsoft overtaking Apple, right? We've seen a lot of growth from other players-- AMD as well as another big chip supplier. As you said, TSMC, ASML. They're one of the chip equipment manufacturing makers.
Other companies who've been involved with generative AI-related software-- we've got Google, we've got Meta, there's Adobe. I mean, all of these types of companies I think are poised to benefit because why I think the momentum is happening is that a lot of people are starting to expect and see that 2024 is the year when it actually starts to hit the mainstream-- when average people in their jobs and in their various environments are going to start to see some of the productivity benefits from AI. And then the hope, of course, is that translates in turn to reduce costs.
Now, the specter of concern is that does that also mean, oh, people, companies can do more with less people and will that lead to layoffs. That is an overhanging cloud that certainly some people are concerned about. But I would say, in general, this is a pretty broad-based level of interest.
And so that's why it's hard to say, oh, it's just going to be this company or that company because there's going to be a couple that may not do as well, particularly there's a couple of tech stops on the hardware side that we know that Q4 was sort of the bottom for a number of companies.
So those Q4 numbers may not be great. Obviously, it's going to be their outlook looking ahead. I think generally those are going to be pretty positive.
BRAD SMITH: And so a lot of investors out there perhaps wondering if they've missed out on the big leg higher in AI from 2023. And if there is yet another leg from here, from this point, what would you need to hear from these companies to firmly signal that there is that next inflection point?
BOB O'DONNELL: Well, it's a great point, Brad. And I think a lot of people are going to be concerned with that because how long can this go on, right? There's always that question. Look, obviously, it's going to boil down to what their expectations are for and the pipelines. If we start hearing about really long pipelines for earnings and demand. And that's why NVIDIA, they just can't make enough chips to satisfy the demand. They're a classic example.
BRAD SMITH: Jensen Huang is making him in his kitchen, Bob, from what we saw. He posted that photo.
BOB O'DONNELL: Yeah, exactly. I mean, the bottom line is I think we will start to see a few other companies besides NVIDIA start to talk about some of that pipeline type of business. And, again, it's going to be broad-based because the thing about AI is obviously, you've got the chips that drive it. You've got the software and services that enable it. And there's companies who also do the implementation services. And that's pretty broad-based.
You've also got people like selling the traditional server hardware into companies. Companies are starting to do some of this AI work on their own. And then all the smaller companies that are feeding into this open AIs that are helping with Microsoft, the Anthropics that are helping with Amazon. There are all of these smaller companies that, of course, may see as purchase targets in the new year as well because a lot of people are also talking about acquisitions for AI in 2024.
But, you know, I think specifically to your question, Brad, I think it's going to be all about what sort of pipelines are they seeing? And are they able to maintain those pipelines? And what sort of vision do they have? Are they willing to even go out more than a quarter and maybe start talking about what their expectations are for the full year?
