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The four large income-paying artificial intelligence stocks could climb compellingly in light of their positive respective outlooks, according to Wall Street analysts. Despite recent gains, the well-known technology companies still look to have room to rise, they added.
One of the stocks, Amazon.com Inc. (NASDAQ: AMZN), of Seattle, Washington, is best known for online retail sales. Citigroup is among the investment banks that rates the stock as a "buy," with "multiple growth catalysts" that will help balance efficiency gains, investments and margin expansion.
Four Large Income-paying Artificial Intelligence Stocks: Amazon.com
Amazon.com proved to be popular with investors on Friday, Nov. 1, when it rose 6.19% to close at $197.93, up $11.53 per share from the end of trading on Thursday, Oct. 31. The company reported rising revenue and earnings per share for the third quarter of 2024 that topped the consensus estimates of Wall Street analysts who cover the company.
Management at Amazon.com announced financial results for the third quarter after the close of trading on Oct. 31, offering revenue guidance between $181.5 billion and $188.5 billion in the fourth quarter, compared to analysts' consensus revenue forecasts of $186.36 billion for the quarter. The company's leaders also gave guidance that fourth-quarter operating income is expected to range between $16 billion and $20 billion, providing a midpoint of $18 billion that is $510 million above Wall Street consensus 4Q estimates of $17.49 billion.
"We emerge from Amazon's 3Q 2024 results incrementally confident that the company can invest in growth, while delivering significant margin expansion," wrote Ronald Josey, an equity research analyst at Citigroup who follows the company. "We highlight retail efficiency gains lowering Amazon's cost to serve, resulting in faster delivery, boosting conversion rates and wallet share gains as lower average selling prices (ASP) for essential products attract greater overall spend."
Four Large Income-paying Artificial Intelligence Stocks: Amazon's Generative AI
At Amazon Web Services, Generative Artificial Intelligence (AI) revenue is growing at triple-digit percentages year over year on a multi-billion dollar annual recurring revenue (ARR) as new instances and demand ramp up, which should deliver consistent growth and profit margins going forward, Josey continued. Amazon's investments in capital expenditures are increasingly a proxy for GenAI demand and Project Kuiper, a planned satellite broadband network is intended to provide affordable, high-speed internet to underserved areas around the world, Josey added.
A "beautiful thing" with data science is that a large language model (LLM) can be customized to offer a "game changing" advances from providing a basic form of artificial intelligence that can interpret, generate and summarize text, Swami Sivasubramanian, the head of AI services and data at Amazon Web Service, told attendees on Oct. 31 at the COSM Technology conference in Seattle, Washington. LLMs now can be "fine tuned," he added.
The progress is enabling machine learning to help solve a "wide range of problems" in health care, transportation or the financial sector Sivasubramanian said. Such developments are putting Amazon at the forefront of such advances.
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Menlo Park, California-based Meta Platforms Inc. (NASDAQ: META) reportedly is developing a search engine that scans the web to provide conversational answers about current events and news in its Meta AI chatbot, according to an Oct. 29 research report from BofA Global Research. Further reports hint that Meta recently partnered with Reuters to enhance the chatbot's ability to answer informational questions about current events and news. By developing its own search engine, Meta could reduce reliance on Google Search and Microsoft Bing, which currently provide information for Meta AI, BofA wrote.
The report about the development of a Meta search engine is consistent with the company's long-term goal to reduce dependence on competitor platforms and technology, BofA wrote. If users increasingly engage with Meta AI for information, a portion of internet traffic could shift away from search engine leader Google Search, with its current search share of 90%, BofA reported. The investment firm continued that Google could and should highlight new AI overview capabilities and any related search query traction to improve increasingly cautious sentiment about its search share risk.
Can Meta Develop a Search Engine Successfully?
With increasing large language model (LLM) capabilities to answer search queries, Meta's growing AI assets such as in-house infrastructure and Llama LLM, along with new information licensing deals, position Meta well to develop internal AI assistant and query response capabilities, the BofA analysts wrote. Compared to new Gen-AI companies such as Open AI and Anthropic, Meta potentially has a larger user and content base to train its own LLM, and more capital to sign licensing agreements, they continued.
"However, we think Meta will be at a data and web scraping disadvantage vs Google given a still limited number of Meta AI users," BofA wrote.
In August, Meta had reported that Meta Al has more than 185 million WebARs (WAUs). Assuming three queries per user each week, BofA estimates Meta Al could generate about 30 billion queries a year vs. Google estimated at two trillion. Plus, the investment firm predicts Meta should be able develop informational retrieval capabilities similar to other LLM based assistants. BofA rates Meta as a buy recommendation.
Citigroup's Josey also rates Meta as a "buy," with "strong drivers" for growth in 2025. He added that those growth catalysts include: - Increased usage trends spurred by solutions such as Advantage+;
- Boosting return on investment (ROI) and incremental ad spending;
- Ramping messaging monetization through business messaging and click-to-message ads; and
- The presence of untapped assets such as Meta AI and Threads.
"We also think Meta's growing AI focus could drive positive product surprises in coming quarters (AI customer service offer, Meta AI ads or subscription, etc.), which can boost optimism on growth," Josey said.
After the company reported its latest quarterly results following the market's close on Oct. 30, Citigroup's Josey raised his price objective on the stock to $660, up from $630, based on higher '25 GAAP earnings per share (EPS) and an unchanged 22x multiple, plus net cash.
Ben Franklin scion Mark Skousen, who heads TNT Trader, Fast Money Alert and Forecasts & Strategies, talks to Paul Dykewicz.
Mark Skousen, PhD, recommended Meta successfully in his TNT Trader advisory service last April. In slightly more than six months, the position has soared 14.88%.
Meta is among the technology companies that are investing billions of dollars to apply artificial intelligence to their respective business models, Skousen wrote to his TNT Trader subscribers in its latest update on Oct. 29. He expressed hope that the company will announce a stock split, which is always seen as giving investors a psychological boost that tends to turn into higher stock prices, he added.
TNT Trader also has a related call option recommendation that is up around 30% thus far. However, Skousen is holding off on recommending a sale of the options, explaining that patience could pay off with the price of those options advancing.
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NVIDIA Corporation (NASDAQ: NVDA), of Santa Clara, California, is another recommended AI stock that continues on an uptrend for Skousen's TNT Trader subscribers. The stock is up 22% and looks likely to keep ascending, according to TNT Trader.
"We have made an average of about 35% on the options, and the final quarter is up around 80% right now," Skousen wrote to his subscribers. "Let's wait another week and see if some positive earnings from the other Magnificent Seven stocks boost Nvidia even higher."
An options-only trading service, Breakout Options Alert, led by Wall Street veteran Bryan Perry, also has recommended call options in NVDA. Similar to Skousen, Perry is advising his Breakout Options Alert subscribers to hold onto the options to let them rise.
Bryan Perry, head of Cash Machine, Breakout Options Alert and Quick Income Trader, recommends NVIDIA options.
NVIDIA is a buy recommendation of Citigroup, which estimates the company has roughly a 67% share of the four-large U.S. hyperscalers to aggregate AI accelerator installed base of around 6.3 million through 2021-2024 estimates.
"We believe NVIDIA relies on three advantages," Citigroup wrote in a recent research note. Those advantages are:
1) Leading performance at the chip level,
2) Strengthening scaling capabilities, and
3) A large-installed base across all major cloud providers to allow enterprises that often adopt a multi-cloud strategy to have the interoperability they need across cloud infrastructures.
Chart courtesy of www.stockcharts.com
Four Large Income-paying Artificial Intelligence Stocks: Microsoft
Redmond, Washington-based technology giant Microsoft (NASDAQ: MSFT) is another way to profit from AI. The company's shares have lagged over the last quarter as investors struggle to rationalize enormous ramps in capital expenditures amid "underwhelming" growth in earnings per share and Microsoft Azure, a cloud platform that offers a variety of services to help users build, run and manage applications.
Citigroup views Microsoft as a "buy" and wrote in a recent research note that the company's share price dip could help the stock provide investors with a slight surprise to the upside, in light of modest expectations by some analysts on Wall Street. The investment bank wrote that it expects the company to show increased second-half Azure/AI demand signals and reassuring commentary on capital expenditures/returns.
"We are buyers of the pullback in shares as we expect investor sentiment to turn more positive," Citigroup wrote. Despite the optimism, Citigroup trimmed its price target in Microsoft to $497.
Chart courtesy of www.stockcharts.com
Four Large Income-paying Artificial Intelligence Stocks: Summary
The four large income-paying artificial intelligence stocks to buy for growth and income feature top technology companies. Despite Russia's continued attacks of its neighboring nation Ukraine and a volatile conflict in the Middle East exacerbated by Hamas refusing to release hostages seized during its terrorist attack in Israel on October 7, 2023, these four technology stocks are favored by top analysts as ways to profit amid the fallout. | | | Sincerely,
Paul Dykewicz, Editor
DividendInvestor.com
| | About Paul Dykewicz: Paul Dykewicz is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul also is the author of an inspirational book, "Holy Smokes! Golden Guidance from Notre Dame's Championship Chaplain", with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz. | | | | | |
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