Cowen’s technology analyst team has expressed growing optimism about the potential of generative artificial intelligence (AI) projects to drive demand for major cloud computing vendors. In their latest annual survey findings from 680 U.S. technology customers, the team reaffirmed their Outperform ratings for Amazon (AMZN), Microsoft (MSFT), and Google-parent Alphabet (GOOGL).
The team highlighted that cloud computing’s “cost savings cycle makes way for burgeoning Gen AI.” They noted that customer responses were particularly positive for Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP).
According to the survey, 76% of respondents are likely to complete their cost optimization or efficiency programs for cloud spending by the end of this year. Additionally, AI inference and training emerged as the top priorities when it comes to cloud projects, with around 75% of survey buyers planning to invest in generative AI projects within the next three years. The analysts at Cowen identified various top generative AI workloads including software development, marketing, product management, and customer service.
Cowen has set stock price targets of $165 for Amazon, $390 for Microsoft, and $150 for Alphabet. On Monday, Amazon’s shares rose 1.8% to $131.42, while Microsoft fell 0.2% to $316.24, and Alphabet traded up 0.4% to $130.79.
Generative AI continues to be a popular investment theme this year. This technology utilizes machine learning algorithms to analyze and process text, images, and videos in order to create content. The release of OpenAI’s ChatGPT last year sparked significant interest in this form of AI.
Analyst John Blackledge anticipates that Amazon Web Services’ growth rate will improve in the second half of this year and throughout 2024. He believes that Amazon will also benefit from the adoption of its custom-built AI chip solutions.
While generative AI is still in its early stages, Blackledge expects it to drive incremental spending on AWS over time. He also predicts that Google’s cloud business will capitalize on the AI trend due to the company’s extensive range of AI solutions and tools. Furthermore, he anticipates that Microsoft will perform well, as the company’s Azure unit retained its position as the number one cloud provider among Cowen’s survey respondents.
