These stocks will benefit from AI — why they are better choices than the hottest picks, says Goldman Sachs

By Frances Yue

Stock investors should focus on companies that would benefit from adopting artificial intelligence in the long term, instead of the near-term beneficiaries, which have already seen significant appreciation in their share prices, according to Goldman Sachs.

Near-term AI beneficiaries, including NVIDIA (NVDA), Meta (META), Amazon (AMZN), Salesforce (CRM), Marvell Technology (MRVL), Adobe(ADBE), Alphabet (GOOGL), ServiceNow (NOW), Microsoft Corporation (MSFT), Intuit (INTU) and Credo Technology (CRDO), on average recorded a return of 66% so far this year, while the S&P 500 SPX saw a year-to-date return of 15%, noted David J. Kostin, chief U.S. equity strategist at Goldman Sachs.

Some companies, which will benefit from AI in the long term, could get a boost in their earnings per share through higher sales and/or margins, Kostin wrote in a Sunday note.

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The Russell 1000 RUI companies, or the top 1000 companies by market capitalization in the U.S., could see a median 19% increase in their earnings per share boosted by AI, according to Kostin.

Kostin also listed 50 companies that could become long-term beneficiaries of AI in sectors that range from communication services to consumer discretionary to energy to financials to information technology. They are expected to see an increase in baseline earnings of up to 388% with a boost from AI. (See below)

-Frances Yue

Sector                  Company name                             Potential change to baseline earnings from AI(%) 
Communication services  Pinterest, Inc.                          162 
                        New York Times Company                   67 
                        News Corp.                               63 
                        ZoomInfo Technologies Inc                58 
                        Sector median                            18 
Consumer discretionary  H&R Block, Inc.                          57 
                        Kohl's Corp.                             49 
                        Coupang, Inc.                            49 
                        CarMax, Inc.                             42 
                        Amazon.com, Inc                          39 
                        Lear Corp.                               30 
                        Sector median                            19 
Consumer staples        Walmart Inc.                             44 
                        Walgreens Boots Alliance, Inc.           38 
                        Costco Wholesale Corp.                   31 
                        Sector median                            18 
Energy                  Occidental Petroleum Corp.               9 
                        Williams Companies, Inc                  9 
                        Sector median                            7 
Financials              Kemper Corp                              42 
                        Brown & Brown, Inc                       40 
                        First American Financial Corp            38 
                        Willis Towers Watson                     36 
                        Marsh & McLennan Companies, Inc          30 
                        Fidelity National Financial, Inc.        30 
                        Voya Financial, Inc.                     30 
                        Sector Median                            17 
Health Care             Tenet Healthcare Corp                    135 
                        DaVita Inc.                              105 
                        Universal Health Services, Inc.          91 
                        IQVIA Holdings Inc                       77 
                        R1 RCM Inc                               77 
                        Encompass Health Corp.                   68 
                        Illumina, Inc.                           54 
                        Sector Median                            20 
Industrials             Clarivate PLC                            232 
                        Robert Half Inc.                         150 
                        Ceridian HCM Holding, Inc                125 
                        Tetra Tech, Inc.                         122 
                        Science Applications International Corp  115 
                        Sector Median                            25 
Information Technology  Guidewire Software, Inc.                 388 
                        Alteryx, Inc.                            203 
                        MongoDB, Inc.                            193 
                        Nutanix, Inc                             177 
                        Smartsheet, Inc.                         171 
                        Snowflake, Inc.                          154 
                        Twilio, Inc.                             138 
                        DXC Technology Co                        95 
                        BILL Holdings, Inc                       93 
                        HubSpot, Inc.                            91 
                        Accenture Plc                            80 
                        Elastic NV                               76 
                        Cognizant Technology Solutions Corp      76 
                        Sector median                            25 
Materials               International Paper Company              41 
                        Sector median                            17 
Real Estate             Jones Lang LaSalle Incorporated          120 
                        Sector median                            10 
Utilities               Hawaiian Electric Industries, Inc        26 
                        Sector median                            16 
                        List median                              72 
                        Russell 1000 median                      19 
                                                                 Source: Goldman Sachs Global Investment Research 

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09-11-23 1424ET

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