Although stock market expert Jim Cramer believes that AI stocks have passed their peak, he still sees potential in a well-known Big Tech stock, especially because of a “real” AI product.
• Companies are using AI hype to boost their stocks
• AI hype has passed its peak when hyped AI stocks do not produce any returns
• Microsoft’s AI copilot not yet priced in
Stock market expert Jim Cramer, as usual, recently warned investors loudly in his show on CNBC to exercise caution in the area of artificial intelligence (AI). The “Mad Money” presenter particularly advised against companies that offer AI modules for consumers. He used the phrase “jumping the shark”, which has become a saying in the USA, an analogy to an American television series from the 1970s that had actually passed its peak with a “jumping over a shark” scene.
According to Cramer, the hyped GoPro action camera also experienced such a moment, only here it was a “goat on a surfboard” with a GoPro attached to its head. Since Jim Cramer saw this picture, the company’s stock has fallen far from its highs.
The moderator does not doubt that artificial intelligence will be an important influencing factor for the success of companies in the future, but many companies overestimate the “legitimate use cases for AI”. The tangible and visible return on investment has so far been missing. And the AI hype will actually fizzle out if companies don’t deliver a “real” return. “We’ve seen a lot of CEOs and analysts trying to incorporate AI into their bullish narratives. And it’s been going on for a while now, and it’s worked,” Cramer said. “But I think those days will soon be numbered unless they find a legitimate way to make a lot of money with AI instead of watching a goat surf off the coast of Hawaii.”
Morgan Stanley analyst Edward Stanley, who warned against being too optimistic about the development of AI technology, and stock market expert David Wehner, who sees AI as an innovation driver but warned against that in the past hypes always imploded before they reached the broad market.
Undervalued Microsoft shares? AI assistant not yet priced in
With an increase of 37.21 percent since the beginning of the year, the shares of the software giant Microsoft have lagged behind the other Big Tech stocks, analysts at Citigroup recently wrote in a note. But this is likely to change in the coming months, according to the Citi team. Wall Street experts opened a positive 90-day catalyst watch for the paper. In addition to a stabilizing PC market, better Azure inputs and a trend towards sales acceleration, analysts also see clear potential in developments in artificial intelligence and the Microsoft Dynamics accounting and sales suite, according to MarketWatch.
The Citi analysts set the price target for Microsoft shares at 420 euros, which corresponds to an upside potential of around 27.6 percent at a current price of 329.06 US dollars (as of: closing price on September 18, 2023).
Jim Cramer confirmed Citi’s buy recommendation for Microsoft in his TV show and – contrary to his other market recommendation – particularly highlighted the development of a Microsoft AI module as a growth engine. The CNBC presenter emphasized that Microsoft’s new AI assistant, which is intended to help Office users create documents, has so far been largely overlooked on the market. If this potential were priced in, Microsoft shares would be valued significantly higher. Unlike other companies that want to jump on the AI bandwagon to give their stocks a boost, Microsoft has substance in the area of artificial intelligence that is worth focusing on. “They have a real AI product. This is definitely, as Citi says, a ‘rich catalyst,'” Cramer said.
On TipRanks, Microsoft shares also receive a strong buy recommendation from 33 Wall Street analysts (30 Buy, 2 Hold, 1 Sell) with an average price target of $390.81 (as of September 13, 2023).
Microsoft shares under pressure: Weak growth rates for the Azure cloud platform
However, after the publication of the last quarterly balance sheet, Microsoft shares on the NASDAQ came under pressure. The reason for this was sales concerns in business with the Azure cloud platform, as CMC Markets analyst Michael Hewson also wrote according to dpa-AFX. Company boss Satya Nadella, on the other hand, emphasized that the use of AI programs will in turn increase the need for cloud infrastructure in the future and thus give new impetus to Azure’s recently weakening growth rates.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
Selected leverage products on GoPro
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on GoPro
The leverage must be between 2 and 20