Buy 3 Tech Giants With Extensive AI Applications Amid Solid Upside

The astonishing rally in U.S. stocks that started at the beginning of 2023 was predominantly driven by the technology sector. The prime factor was the unprecedented adoption of generative artificial intelligence (AI) technology worldwide.Lately, a section of market analysts and financial researchers have raised concerns about the potential profitability of massive investments in generative AI by several technology giants. We believe that AI applications will continue to gather pace in the coming years, buoyed by the rapid penetration of digital technologies and the Internet.  At this stage, we recommend three technology behemoths with extensive applications of generative AI. These companies are - Alphabet Inc. GOOGL, Adobe Inc. ADBE and Broadcom Inc. AVGO.Buy 3 Tech Giants With Extensive AI Applications These three companies have beaten their respective Zacks Consensus Estimate for both the top and bottom lines in third-quarter 2024. These stocks have solid price upside potential in the short term.In the long term, these stocks have a higher earnings per share (EPS) growth rate than the broad-market S&P 500 index, which should drive their stock prices in the next 3 to 5 years. Each of these stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Alphabet Inc.A deepening focus on generative AI technology is a major positive for GOOGL in this data-driven world. Google has been well-poised to capitalize on the growing proliferation of generative AI-backed chatbots on the back of Bard, which enables users to collaborate with experimental AI with new features that include image capabilities, coding support and app integration. Alphabet is riding on strong cloud and search growth. Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex, generative AI (Gen AI) solutions and core Google Cloud Platform products. GOOGL’s strong AI portfolio is helping it attract new customers, win larger deals, and deepen product adoption among existing customers. Alphabet’s expanding GenAI capabilities present a potential catalyst for future growth. GOOGL’s dominant position in the search engine market is a strong growth driver. Major search updates and the removal of bad ads to enhance the search results continue to boost traffic on GOOGL’s search engine.GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software. In addition, GOOGL’s Vertex AI enables developers to train, tune, augment and deploy applications using generative AI models. These generative AI capabilities are aiding GOOGL in enhancing search results, accelerating Android development, boosting healthcare reach and delivering enhanced cloud experience.Excellent Price Upside Potential for GOOGL StockThe average short-term price target of brokerage firms represents an increase of 21.6% from the last closing price of $169.24. The brokerage target price is currently in the range of $170-$235. This indicates a maximum upside of 38.9% and no downside.Alphabet has an expected revenue and earnings growth rate of 12% and 11.4%, respectively, for 2025. The Zacks Consensus Estimate for next-year earnings has improved 2.8% in the last seven days. GOOGL currently has a long-term (3-5 years) EPS growth rate of 17.6%, higher than the S&P 500’s long-term EPS growth rate of 13.1%. Image Source: Zacks Investment ResearchAdobe Inc.Adobe has extensively implemented AI applications across its flagship products, such as Photoshop, Illustrator, Lightroom, and Premiere. Earlier this year, ADBE introduced generative AI-driven Adobe Firefly. Moreover, Adobe Acrobat and Reader AI Assistant help users summarize documents and answer questions, saving time and helping users accomplish tasks faster.Using its new AI-driven cloud-based platform, ADBE is also diversifying into digital marketing services, offering data mining services, which help businesses measure page views, purchases and social media sites. Adobe Marketing Cloud enables marketers to deliver personalized web experiences across multiple devices, manage multichannel campaigns and optimize media monetization. These services help businesses streamline marketing and products for targeted consumer groups, including chief marketing officers, chief revenue officers, advertising agencies, publishing executives and digital marketers. Adobe is benefiting from strong demand for its creative products. ADBE’s Creative Cloud, Document Cloud and Adobe Experience Cloud products are driving top-line growth. The major positives are rising subscription revenues and solid momentum across the mobile apps. Growth in emerging markets and robust online video creation demand remain tailwinds. Additionally, solid demand for Adobe’s commerce offerings and the growing adoption of Acrobat are encouraging. Adobe’s strong market position, compelling product lines and continued innovation remain positive. ADBE has launched Adobe Express, an application for quick editing effects. Leveraging generative AI, this tool is useful for short-form video content like Instagram Reels. Adobe also launched an AI-based Express app for iOS and Android.Robust Price Upside Potential for ADBE SharesThe average short-term price target of brokerage firms represents an increase of 26.2% from the last closing price of $481.35. The brokerage target price is currently in the range of $440-$703. This indicates a maximum upside of 46% and a maximum downside of 8.6%. Adobe has an expected revenue and earnings growth rate of 10.9% and 12.4%, respectively, for next year (ending November 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% in the last 60 days. ADBE currently has a long-term EPS growth rate of 13.1%, in line with the S&P 500. Image Source: Zacks Investment ResearchBroadcom Inc.Broadcom is benefiting from strong demand for its networking products. In second-quarter 2024, it witnessed strong demand for custom AI accelerators, AI networking solutions, Ethernet switching, optical lasers, thin dies, PCI Express switches and Network Interface Cards from hyperscale customers. AVGO’s solutions are suitable for addressing the needs of an increasing AI workload and the growing need for fast networking in data centers. The acquisition of VMware has benefited the Infrastructure software solutions of Broadcom. VMware’s expanding clientele, which includes the likes of Alphabet and Meta Platforms, is noteworthy. AVGO’s strong partner base, including Arista Networks, Dell Technologies, Juniper and Supermicro, has been a key catalyst. AI revenues are now expected to be $12 billion for fiscal 2024.Solid Price Upside Potential for AVGO StockThe average short-term price target of brokerage firms represents an increase of 14.9% from the last closing price of $168.55. The brokerage target price is currently in the range of $150-$240. This indicates a maximum upside of 42.4% and a maximum downside of 18.6%.Broadcom has an expected revenue and earnings growth rate of 16.7% and 27.1%, respectively, for fiscal 2025 (ending October 2025). The Zacks Consensus Estimate for current-year earnings has improved 3.4% in the last 60 days. AVGO currently has a long-term EPS growth rate of 16.4%, higher than the S&P 500’s long-term EPS growth rate of 13.1%.Image Source: Zacks Investment ResearchResearch Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Adobe Inc. (ADBE): Free Stock Analysis Report Broadcom Inc. (AVGO): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks