We recently compiled a list of the 10 AI Stocks That Will Skyrocket. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against the other AI stocks.
DWS, an expert in active, passive, and alternative asset management, believes that expectations around the usage of Artificial Intelligence (AI) across industries acted as one of the critical stock market drivers over the previous 2 years. In 2025, AI developments are expected to make significant strides throughout various domains. The firm anticipates a shift from generalized applications to industry-specific solutions. Notably, companies are expected to refine their strategies to target specific use cases providing measurable results.
Generative AI CapEx Will Continue to Increase, Says DWS
DWS, while quoting Bloomberg estimates, highlighted that some of the big technology firms can collectively increase capex to ~$200 billion in 2025. More than $90 billion in incremental capital spending in 2024-25 vs. 2023 is projected to be earmarked mainly for expanding Gen AI infrastructure. On a related note, Goldman Sachs Asset Management believes that the AI capex from well-established hyperscalers is projected to surpass $250 billion in 2025. This hints at optimism that hyperscalers remain confident in the ROI (Return on Investment) they will witness from such significant investments.
DWS sees the de-globalization movement spreading to data and AI, with countries spending a significant amount to subsidize “sovereign AI.” To provide a brief overview, it refers to a nation’s capabilities to establish, control, and deploy its own AI technologies. It spans both physical and data infrastructures. Notably, in the past year, the governments of the US and China have pledged $40 billion – $50 billion each dedicated towards AI investments.
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Key AI Trends to Watch Out
Appinventiv believes that conversational AI, Predictive Analytics, AI Democratization, Agentic AI, and Generative AI, among others, are some of the key trends to watch out for. While conversational AI focuses on streamlining customer interactions, generative AI has been revolutionizing content creation across fields including healthcare. Additionally, multi-modal Al remains one of the most popular AI trends in business. It focuses on leveraging machine learning trained on multiple modalities, including speech, images, and traditional numerical data sets. As a result, there will be a more holistic and human-like cognitive experience.
Appinventiv opines that companies can capitalize on multi-modal Al and develop intelligent systems analyzing diverse data streams, which can help improve natural language understanding and voice recognition for better user experiences.
Our Methodology
To list the 10 AI Stocks That Will Skyrocket, we sifted through several online rankings and shortlisted the companies catering to the broader AI sector. Next, we chose the ones that analysts see significant upside to. Finally, the stocks are arranged in ascending order of their average upside potential, as of February 24. We also mentioned hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
Adobe Inc. (NASDAQ:ADBE)
Average Upside Potential: 33.0%
Number of Hedge Fund Holders: 117
Adobe Inc. (NASDAQ:ADBE) is involved in the broad-based AI business mainly via its development of AI-powered tools and technologies that are focused on enhancing creativity and productivity. Adobe Firefly is a suite of generative AI-powered features for creating image content. Analyst Keith Weiss from Morgan Stanley maintained a “Buy” rating on the company’s stock with a $660.00 price objective. As per the analyst, the rollout of the Firefly Video model with its tiered pricing remains a strategic step towards expanding user adoption and improving monetization opportunities as Adobe Inc. (NASDAQ:ADBE)’s functionality grows. This pricing strategy can fuel adoption and retention while, at the same time, helps in maintaining competitive advantages in areas such as copyright safety and integration with existing Adobe products.
Adobe Inc. (NASDAQ:ADBE)’s significant investments in AI technology, mainly via its Firefly platform, can open up new revenue streams and enhance its addressable market. Through the integration of AI capabilities across its product suite, the company will be able to enhance the value proposition of its existing offerings and attract new users. Overall, Adobe Inc. (NASDAQ:ADBE)’s strategy, AI innovation, and significant cross-cloud opportunity place it well for 2025 and beyond.
Polen Capital, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
Overall ADBE ranks 10th on our list of the AI stocks that will skyrocket. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.