Goldman Sachs Reveals Long-Term AI Portfolio: Here Are The 50 Stocks To Monitor

Author: Piero Cingari | August 22, 2023 12:02pm

Goldman Sachs (NYSE:GS) unveiled an intriguing list of 50 stocks that are positioned for substantial long-term growth due to the widespread adoption of artificial intelligence (AI).

This selection represents a comprehensive assessment of companies within the Russell 1000 index that stand to benefit significantly from the integration of AI into their businesses.

Earlier this year, the investment bank unveiled 11 technology stocks whose business models can be quickly integrated with AI technology, leading to short-term gains. The pool of early AI adopters was classified into three groups:

• Enablers: NVIDIA Corp. (NASDAQ:NVDA), Marvell Technology Group Ltd. (NASDAQ:MRVL), and CrowdStrike Holdings Inc. (NASDAQ:CRWD)
  
• Hyperscalers: Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), and Amazon.com Inc. (NASDAQ:AMZN)
  
• Empowered Users: Meta Platforms Inc. (NASDAQ:META), Salesforce.com Inc. (NYSE:CRM), Adobe Inc. (NASDAQ:ADBE), ServiceNow Inc. (NYSE:NOW), and Intuit Inc. (NASDAQ:INTU).

Goldman Sachs: AI To Boost Productivity, Profit Margins

According to Goldman Sachs, AI will significantly boost labor productivity, leading to enhanced corporate revenues and, in some instances, improved margins due to reduced labor costs.

In a note shared Tuesday, equity analysts Ryan Hammond and David J. Kostin unveiled a long-term AI basket that comprises 50 stocks with the potential to outperform the broader market over the coming years.

"We expect AI adoption will likely begin to have a meaningful macro impact sometime between 2025 and 2030," Goldman Sachs wrote.

The bank’s analysis indicates that following widespread AI adoption, the median stock within their basket could witness an impressive 72% increase in earnings per share (EPS), compared to a 19% rise for the median stock in the Russell 1000 index.

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Goldman Sachs’ Long-Term AI Basket: Sectors and Stocks To Watch

Goldman Sachs’ selection methodology places a heavy emphasis on metrics like wage bill exposure to AI automation and the labor cost-to-revenue ratio.

The Software & Services sector stands out with the potential to experience the highest earnings increase of up to 46%, compared to the baseline.

Prominent stocks in this category include:

• Guidewire Software, Inc. (NYSE:GWRE)
• Alteryx, Inc. (NYSE:AYX)
• MongoDB, Inc. (NASDAQ:MDB)
• Nutanix, Inc. (NASDAQ:NTNX)
• Smartsheet, Inc. (NYSE:SMAR)
• Snowflake, Inc. (NYSE:SNOW)
• Twilio, Inc. (NYSE:TWLO)
• DXC Technology Co. (NYSE:DXC)
• BILL Holdings, Inc. (NASDAQ:BILL)
• HubSpot, Inc. (NYSE:HUBS)
• Accenture Plc (NYSE:ACN)
• Elastic NV (NYSE:ESTC)
• Cognizant Technology Solutions Corp. (NASDAQ:CTSH)

Consumer Staples Distribution & Retail is another sector anticipated to reap benefits, with projected earnings boost of 35% thanks to AI adoption. Stocks in this sector are:

• Walmart Inc. (NYSE:WMT)
• Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
• Costco Wholesale Corp. (NASDAQ:COST)

While various sectors are expected to experience growth, the Energy sector emerges as having a comparatively lower potential increase of 7% due to AI integration.

• Occidental Petroleum Corp. (NYSE:OXY)
• Williams Companies, Inc. (NYSE:WMB)

Remaining Stocks in the Long-Term AI Basket:

Communication Services:

• Pinterest, Inc. (NYSE:PINS)
• New York Times Company (NYSE:NYT)
• News Corp. (NASDAQ:NWSA)
• ZoomInfo Technologies Inc (NASDAQ:ZI)
• Consumer Discretionary:
• H&R Block, Inc. (NYSE:HRB)
• Kohl’s Corp. (NYSE:KSS)
• Coupang, Inc. (NYSE:CPNG)
• CarMax, Inc. (NYSE:KMX)
• Amazon.com, Inc. (NASDAQ:AMZN)
• Lear Corp. (NYSE:LEA)

Financials:

• Kemper Corp (NYSE:KMPR)
• Brown & Brown, Inc. (NYSE:BRO)
• First American Financial Corp. (NYSE:FAF)
• Willis Towers Watson (NYSE:WTW)
• Marsh & McLennan Companies, Inc. (NYSE:MMC)
• Fidelity National Financial, Inc. (NYSE:FNF)
• Voya Financial, Inc. (NYSE:VOYA)

Health Care:

• Tenet Healthcare Corp. (NYSE:THC)
• DaVita Inc. (NYSE:DVA)
• Universal Health Services, Inc. (NYSE:UHS)
• IQVIA Holdings Inc (NYSE:IQV)
• R1 RCM Inc (NASDAQ:RCM)
• Encompass Health Corp. (NYSE:EHC)
• Illumina, Inc. (NASDAQ:ILMN)

Industrials:

• Clarivate PLC (NYSE:CLVT)
• Robert Half Inc. (NYSE:RHI)
• Ceridian HCM Holding, Inc. (NYSE:CDAY)
• Tetra Tech, Inc. (NASDAQ:TTEK)
• Science Applications International Corp (NYSE:SAIC)

Materials:

• International Paper Company (NYSE:IP)

Real Estate:

• Jones Lang LaSalle Incorporated (NYSE:JLL)

Utilities:

• Hawaiian Electric Industries, Inc. (NYSE:HE)

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