These 9 Discounted Stocks Are Boosting Their Sales With AI: Goldman
Invest in businesses growing their AI-enhanced revenues, says Goldman Sachs. “Phase 3” AI stocks are starting to outperform AI infrastructure stocks
Invest in businesses growing their AI-enhanced revenues, says Goldman Sachs. “Phase 3” AI stocks are starting to outperform AI infrastructure stocks
Nvidia stock has clawed back its DeepSeek losses, but AI investors should be looking for opportunities beyond the chipmaker, Goldman Sachs believes.
Instead of continuing to look to Nvida for AI-related gains, consider “Phase 3” companies, or firms developing AI-enabled revenues, the bank’s chief investment strategist David Kostin recommends. “Phase 1” and “Phase 2” refer to Nvidia and AI infrastructure companies, respectively.
Why is 2025 shaping up to be the year of AI monetization? For starters, companies are displaying heightened enthusiasm to incorporate it into their business models. The number of firms mentioning “AI” during quarterly earnings calls has drastically increased, from under 20% of the S&P 500 companies in 2023 to 50% in the most recent Q4 2024 earnings season.
However, actual adoption remains low: only 6% of US companies are incorporating the technology into their business models, and 10% plan to use AI in the next six months, according to the US Census Bureau. That makes now the perfect time to buy into the Phase 3 trade before it becomes the next big trend in the market, the bank said.
There are some signs that this shift is happening. In recent months, AI beneficiaries have outperformed AI infrastructure companies when comparing indexed returns to the performance of the equal-weigh S&P 500.
And while DeepSeek might have sent shockwaves through the market by sparking an AI sell-off, it could actually be a tailwind for Phase 3 companies, said Sumali Sanyal, managing director and senior PM for systematic global equities at Xponance.
Inference costs, or the computation expenses required to run AI models in real-world applications, are significant for firms right now. New entrants like DeepSeek introduce more efficient models and increase competition in the AI market, which will help bring costs down.
“Those costs are going to come down dramatically and that’s going to open up the opportunity set for many smaller companies,” Sanyal told BI. That means the AI trade will no longer be constrained to mega-cap tech companies.
Software companies are leading the charge in adopting AI into their business models, with 15 out of the 27 stocks Goldman Sachs identified as Phase 3 being from that industry. An additional five stocks belonged to the IT services industry.
“Going forward, the expectation is that the software and services companies will start adopting generative AI to enhance their existing models, design new industry applications, and start improving coding efficiency,” Sanyal said. Human resources, customer relationship management, and cybersecurity are examples of areas within software where Sanyal is seeing the most adoption.
Unlike Nvidia, some stocks in Goldman Sachs’ basket of Phase 3 companies didn’t get much love from investors in 2024. Nine of them saw a price decline last year, while the overall S&P 500 rose over 23%. The stocks are listed below, along with their 2025 estimated sales growth and executive commentary from their most recent earnings calls.
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