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Wall Street may be underestimating the potential for one major investing area to underpin generative artificial intelligence models: data. So far this year, investors focused their attention on Nvidia as the leading AI chipmaker, while technology behemoths Alphabet and Microsoft battled it out to provide the world’s dominant chatbot. The moves boosted tech-heavy indexes such as the Nasdaq Composite early on, and contributed to a large chunk of the S & P 500 ‘s early 2023 gains. Year to date, Nvidia has soared 191% while Microsoft and Alphabet have jumped 30% and 48%, respectively. Now, as Wall Street has begun evaluating the secondary and tertiary winners of this long fight, investors may want to search for the data companies that also could triumph. “… [T]he outputs of these models will only be as good as the underlying data sets that are used to train these models (‘garbage in equals garbage out’),” wrote Barclays analyst Raimo Lenschow in a September note to clients, calling data the “underestimated component” of AI. “In this respect, investors need to pay more attention to the holders of the proper, valuable data sets when thinking about long-term beneficiaries,” he added. Finding the data winners Engineers rely on data to train AI models, improve their performance and create a productive and relevant technology used by millions of consumers. While the outlook appears bright for the industry, the AI-fueled benefits from these companies could be years away, warns Paul Meeks, a money manager specializing in tech at Independent Solutions Wealth Management. “Right now, AI for them is an expense because they’ve got to train the models,” he said. “If they train the models, then they can turn that knowledge that they’ve generated from expense into revenue.” ORCL YTD mountain Oracle shares year to date Over the long run, Meeks views Oracle and enterprise resource planning companies Salesforce , ServiceNow and Workday as data beneficiaries of the AI boom. The median Wall Street price target on Oracle implies about 24% upside for the stock, which has already jumped 28% in 2023. App vendors with access to large swaths of first-party data, and holders of firm-specific data, also look well positioned to benefit from the data rush, according to Barclays. And, while Microsoft reigns as a key player, ServiceNow, Intuit , Oracle and Salesforce should also catch some tailwinds. Intuit, for example, can capitalize on its data from 500,000 customers, while Salesforce is situated to harness its leading customer relations management software market share and AI-powered GPT versions of its tools, Barclays said. Companies like Sprinklr who are partnering with social media vendors may also benefit by making data more easily accessible to mass consumer markets, according to Barclays. HSBC echoed similar confidence in the outlook for AI in a note to clients earlier this month, although it noted the near-term implications appear foggy. Even so, access to data will prove to be a “competitive advantage” enabling companies to build a better model, analysts wrote. Oracle, along with Microsoft, is “very well placed” to prosper from AI due to its strong database business and data storage, HSBC said. Snowflake ‘s data warehousing business should help companies deploy and manage vast data pools and eventually fuel AI-driven revenue growth. “Oracle is very strong in the cloud-based enterprise software application segment, which look very well placed to use AI to automate business tasks,” the bank said. “Oracle’s AI-driven autonomous database significantly reduces the cost of database administration.” — CNBC’s Michael Bloom contributed reporting
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