Recently, including$Applovin (APP.US)$、$Palantir (PLTR.US)$、$Innodata (INOD.US)$、$Shopify (SHOP.US)$、$Duolingo (DUOL.US)$After AI application companies announced their performance, the stock price continued to rise, and the market once again focused on the investment opportunities of AI concept stocks.
Jonathan Curtis, Executive Vice President of Global Execution and Chief Investment Officer of the Franklin Stock Team, believes that as AI technology continues to develop downstream in the "application" field, although it will still take some time, this will give tech companies market confidence, no longer excessively worrying about issues like "spending too much, earning too little."
Benefiting from impressive performance, AI application stocks have continued to strengthen in recent stock prices.
Recently, US AI application stocks have successively announced their performance, including:
AppLovin provides AI-driven advertising marketing solutions for enterprises. On November 6, 2024, AppLovin released its Q3 2024 performance, with revenue increasing by 39% year-on-year, net income increasing by 300% year-on-year, and software platform revenue increasing by 66% year-on-year.
Palantir's latest product AIP uses large language models to help clients create AI assistants, build Agents, etc. On November 4th, Palantir released its 2024 Q3 performance, with Q3 revenue increasing by 30% year-on-year. In recent years, while Palantir's revenue has grown rapidly, the net margin has shown a strong upward trend, reflecting the strong economies of scale of the company's AI products.
Innodata provides services such as supervised fine-tuning, RLHF, data collection + creation, and model evaluation for AI construction and use. On November 8, the company released its 2024Q3 financial report, with revenue of $52.2 million, a 136% year-on-year growth. Recently, The Information reported that the scarcity of high-quality text data is a key issue encountered by OpenAI in the development of the next generation Orion, possibly reinforcing the importance of market data.
Shopify, a Canadian multinational e-commerce company, offers a series of AI features through Shopify Magic to support tasks such as store construction, marketing, customer support, and backend management. On November 13, the company released its Q3 2024 financial report: GMV of $69.7 billion, a 24% year-on-year growth, and revenue of $2.16 billion, a 26% year-on-year growth.
ToC online education company Duolingo launched a feature on September 24, 2024, allowing video calls with the AI character Lily for max subscription users. On November 6, Duolingo published its Q3 2024 financial report, showing a 40% year-on-year revenue growth, 54% DAU growth, and 36% MAU growth. The company's earnings conference mentioned strong demand for Lily video calls, which may have contributed to the growth in member subscriptions this quarter.
Taking AppLovin as an example, the company soared over 46% the day after releasing its Q3 earnings, with a stock price increase of over 70% by the US market close on November 15. CNBC commented that this makes it one of the best-performing tech stocks in the US capital markets this year.
AI application stocks break the concern of 'too much AI spending, too little revenue.'
Due to continuous investments in AI by tech giants, their capital expenditures are also steadily increasing. According to Q3 financial reports:
$Microsoft (MSFT.US)$Capital expenditures in the third quarter increased by 50% year-on-year to $15 billion, with an expected 32% increase in the fourth quarter. Expenditure in the 2024 fiscal year is projected to grow by over 55%, primarily driven by active AI investments and general server replenishment.
$Alphabet-A (GOOGL.US)$ In the third quarter, capital expenditures increased by 62% year-on-year to $13 billion, with fourth-quarter spending expected to be similar to the third quarter, and next year's spending will see a "significant" increase, mainly driven by AI infrastructure investments.
$Amazon (AMZN.US)$Real estate and equipment spending increased by 81% year-on-year to $22.6 billion in the third quarter, with capital expenditures expected to reach a record $75 billion this year, a 55% increase from last year, with capital expenditure being driven by the AWS cloud department, and next year's capital expenditures may be even higher.
$Meta Platforms (META.US)$ In the third quarter, capital expenditures increased by 26% year-on-year to $8.3 billion, with the high end of the guidance range for full-year capital expenditures remaining at $40 billion and the low end raised by $1 billion to $38 billion, hence the midpoint of the guidance range shows an increased growth rate of 43%, spending mainly driven by investments in AI infrastructure. Meta also reiterated significant increases in capital expenditures in AI infrastructure next year.
Previously, some market views believed that the current returns on investments in AI are not sufficient to justify large-scale investments. However, the main reason these companies are making strong investments is to establish a moat by investing resources early on, secure a strong competitive position, and ultimately monetize within the next three to five years. In the short term, massive capital expenditures may threaten the hefty profit margins of these companies, and the pressure on profitability could make investors uneasy.
In response, Jonathan Curtis, Global Co-Head of Equities and Chief Investment Officer for Stock Investing at Franklin Templeton, recently pointed out that there is no need to worry about the massive AI spending by tech giants. It is a "arms race" for future computational power improvements and monetization at the application end.$NVIDIA (NVDA.US)$The maximum customer Microsoft's future GPU expansion may be 10 times, and the demand from future sovereign countries will also increase significantly. At the same time,$Taiwan Semiconductor (TSM.US)$Even by 2025, the demand for AI chips will still outstrip supply.
In addition, Curtis believes that as AI technology continues to develop towards the downstream "application" field, although it will still take some time, this will give technology companies market confidence, no longer excessively worrying about issues like "spending too much, earning too little". The outstanding performance of AI application stocks such as AppLovin and Palantir can to some extent demonstrate that it is feasible to monetize through investing in AI. Therefore, the outstanding performance of AI application stocks is expected to become the catalyst for the rise of the AI sector.
How to invest in AI industry opportunities through ETFs?
Due to the relatively complex AI industry chain and the difficulty of grasping industry rotation, investing in ETFs can avoid the trouble of stock selection and make it easier to obtain returns at the industry average level. Therefore, investors can bet on the rise of the AI industry through investing in ETFs. Some ETFs that track the AI industry include:
$iShares US Technology ETF (IYW.US)$
$Fidelity Covington Trust Msci Information Technology Index Etf (FTEC.US)$
$First Trust Dow Jones Internet Index Fund (FDN.US)$
Looking for favorite ETFs? Futubull ETF Zone can help you! OpenMarket > ETF > Major Markets > Choose different types of ETFs as you like
Editor/Jeffy
