The Magnificent Seven stocks roared in 2023 as generative artificial intelligence took the tech industry by storm. Strong AI positions boosted Nvidia and Microsoft stocks, although Apple and AAPL stock as well as Amazon.com also thrived, despite lagging in gen AI.
Clearly, AI has become an important battleground. And Wall Street will focus closely on the competition's impact on the Magnificent Seven stocks.
Magnificent Seven Stocks: Huge 2023 Gains
To be sure, the 2023 stock performance of the Magnificent Seven — including Google-parent Alphabet, Facebook-parent Meta Platforms and Telsa Motors — will be hard to beat. In fact, the Magnificent Seven stocks have struggled in early 2024 amid a market pull back.
NVDA stock gained 239% in 2023, META stock shot up 194%, TSLA stock jumped 102%, GOOGL stock advanced 58%, MSFT stock roared 57% and APPL stock climbed 48%. They're among AI stocks to watch.
Many big-cap tech companies have been major players in artificial intelligence even before the generative AI craze began in November 2022. For example, Netflix has for years used AI to make movie recommendations to subscribers while AI algorithms helped shape story plots.
But the launch of ChatGPT in late 2022 turned AI into a major technology trend. Generative AI introduced consumers to technologies based on large language models that enabled them to create generally high-quality content, including text, images and videos.
Gen AI Battleground In 2024
For the Magnificent Seven, the battle over AI covers consumer internet apps and the enterprise markets, such as cloud computing. Wall Street is definitely paying attention.
"It is perhaps understandable why the market capitalization of the Magnificent 7 has more than doubled so far in 2023," said UBS analyst Solita Marcelli in a Dec. 21 note to clients. "With the significant resources needed to build and benefit from complex AI models, we expect the large players to grow larger still."
Here's a look at AI developments to look for in 2024 from the Magnificent Seven.
• Apple. AAPL stock topped the $3 trillion market valuation mark in 2023. The iPhone maker reportedly has its own generative AI chatbot in the works.
Also, analysts expect Apple to target on-device processing of AI apps, bypassing the need to connect to the internet cloud. Key to that will be memory efficient, specialized language models. Apple designs it's own processors.
Wedbush analyst Daniel Ives offers another possibility. "We expect Apple to unveil a developer-built AI App Store by late 2024 which will be key to further monetizing Apple's golden installed base," he told Investor's Business Daily.
Magnificent Seven Stocks: Microsoft's AI Push
Amid the New York Times content infringement lawsuit versus OpenAI and Microsoft, Apple could explore AI deals with news publishers. Apple certainly has the cash to pay out millions or billions to media companies.
Much bigger AI investments would reduce the free cash flow of AAPL stock. But that may not hurt AAPL stock since the investments could eventually drive an iPhone upgrade cycle.
• Microsoft. It's the biggest investor in OpenAI, having invested some $13 billion in the startup. Its Azure cloud computing business has roped in thousands of new customers that are launching AI projects using OpenAI's models. Microsoft's Bing internet search engine, though, has yet to make sizable market share gains versus Google.
What might matter most to MSFT stock could be the monetization of gen AI through "Copilots." The ChatGPT assistants are being integrated into Office 365 productivity software and cybersecurity products. Redmond, Wash.-based Microsoft made its Office Copilot services available to enterprise users starting Nov. 1.
Also, it remains to be seen how much Microsoft benefits from having a nonvoting member of the OpenAI board following the Sam Altman CEO drama in late 2023.
Gen AI: Nvidia Targets Startups
• Nvidia. The chipmaker's lead in producing powerful processors, such as the H100, used in internet data centers, drove the big gains of NVDA stock in 2023. With new product rollouts in 2024, Nvidia will aim to keep its lead over Advanced Micro Devices and Intel.
Nvidia, though, is playing the long game. It's partnering with many software makers, such as Salesforce, to build AI ecosystems for app development. It's also funding AI startups that could become bigger players down the road. According to a Morgan Stanley report, Nvidia invested in over 20 AI startups in 2023, including Cohere, Inflection, Aleph Alpha, CoreWeave and Adept.
• Google. Despite being a leader in AI for years in advertising and search, gen AI's emergence appeared to catch Google off-guard. While conversational chatbot technology is now the main battlefield versus Microsoft and others, the competition will eventually shift to personalized AI assistants, or agents, that perform shopping or other tasks on the behalf of users. After falling behind to ChatGPT, Google aims to be a leader in "agentic AI."
In early December, Google unveiled its much-anticipated, next-generation, large language model (LLM) called Gemini. Google will integrate Gemini's capabilities into Bard, its rival to ChatGPT in the consumer market. Gemini will also compete in the cloud computing market versus Microsoft/OpenAI.
Digital Advertising AI Battleground
One big question is how integrating chatbot AI technology into search results will impact Google advertising revenue. The company plans to integrate generative AI into search, maps, Workspace, photos and Android devices.
• Meta. According to Goldman Sachs, gen AI will lead to shifting budgets across digital advertising with Google and Meta having the most at stake. For businesses that advertise on its social media platforms, Meta aims to provide tools that enable them to customize consumer-facing chatbots.
Also, Meta plans to use AI to improve user experiences at its social media platforms. In September, the company launched its consumer chatbot Meta AI. The company also unveiled a new image generating model named Emu.
"Meta is testing more than 20 new gen-AI features related to search, chat and messaging to enhance user experience and enable deeper AI integration across its apps," Bank of America analyst Justin Post said in a recent report. "A large number of new features will make Meta AI personal assistant and text-to-image generating capabilities more embedded within the Meta ecosystem."
Magnificent Seven Stocks: Musk Looms
• Amazon. One of the Magnificent Seven stocks, Amazon for years has used AI technology throughout its core e-commerce business. That includes customer product recommendations, supply chain management, fraud detection, image recognition and customer service. Just before OpenAI's ChatGPT arrived, though, Amazon pulled back on marketing smart home devices that used its Alexa voice assistant.
The biggest provider of cloud computing services by far, Amazon is pushing back on the threat posed by the Microsoft and OpenAI partnership. Amazon plans to invest up to $4 billion in Anthropic, one of OpenAI's chief rivals. Amazon also works with several AI startups, including Hugging Face, Cohere, Stability.ai and AI21 Labs.
In November, Amazon Web Services made a slew of gen AI announcements at its re:Invent customer conference. A longtime customer of Intel, Amazon also touted a new alliance with Nvidia. In 2024, Amazon will be under pressure to prove its strategy of working with Anthropic, Hugging Face and other OpenAI rivals will protect the cloud business.
• Tesla. Also one of the Magnificent Seven stocks, the maker of electric vehicles has used artificial intelligence software in self-driving technology since its inception. Tesla and SpaceX founder Elon Musk has a long history in the AI industry. A founder of OpenAI, Musk left in 2019. He's now backing a rival builder of LLMs called xAI. Foundation models are the building blocks for AI apps.
Follow Reinhardt Krause on X, formerly called Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
