Evercore ISI is updating some of its top picks that it says are poised to benefit from the application of artificial intelligence as the third-quarter earnings season shifts into high gear. Ongoing macroeconomic challenges, such as rising bond yields, rising oil prices and war in the Middle East, could provide a daunting backdrop as third-quarter reports roll in. But companies whose upward earnings per share revisions mention artificial intelligence could be positioned to outperform, according to Evercore ISI. “In an environment filled with macroeconomic headwinds, while stock market correlations remain subdued by historical standards, companies best positioned to generate rising earnings, as JPM did last Friday, while developing a plan to integrating generative AI into their ‘corporate DNA,’ are best positioned to outperform,” portfolio strategist Julian Emanuel said in a note to clients on Sunday. Alongside pure technology names and communications services, Emanuel sees finance as one of the areas best placed to benefit from harnessing AI to improve productivity. Here are some of the companies that made the Evercore ISI list: It’s no surprise that popular tech names Alphabet and Nvidia made the cut, given their dominant role in the AI-powered stock market advance of 2023 Shares of Nvidia have more than tripled since the start of the year, while Google and YouTube parent Alphabet are up 57%. Evercore ISI estimates that the search giant has 44% exposure to generative AI. But Emanuel sees a host of other beneficiaries of AI outside of technology. That includes JPMorgan Chase, up 10% year to date. Stocks rose Friday after the nation’s largest bank beat profit expectations in a higher interest rate environment and reported better-than-expected interest income. JPMorgan offers favorable EPS momentum and enjoys overall AI exposure of 42%, as a large portion of its workforce is exposed to AI tools for productivity. JPM year-to-date JPMorgan Chase shares year-to-date Another potential AI winner is Eaton, with 29% exposure to AI. The energy management company, up nearly 34% this year, is well-positioned to benefit from the AI revolution in the industrial sector, Evercore ISI said. “ETN’s electrical business is what drives its stock, accounting for 70-75% of the company’s total sales and profits,” Emanuel wrote. “Data centers alone account for 21% of total electricity sales and 15% of total enterprise sales.” Evercore ISI also highlighted Booking Holdings, Arista Networks, CarMax and Pure Storage on its AI winners screen. CNBC’s Michael Bloom contributed reporting.
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