Five metrics for AI trendspotting
Shutthiphong Chandaeng
The ability to identify stocks that could command an artificial intelligence is becoming important for investors in all sectors, the Morgan Stanley global equity strategy team says.
AI is in focus ahead of Nvidia (NVDA) reporting after the bell Wednesday.
About 45% of S&P 500 (SP500) (NYSEARCA:SPY) (IVV) (VOO) mentioned AI in earnings calls, according to strategist Edward Stanley.
In a broader "set of US public companies (>$1B in market cap), the normalized trend of AI and related term mentions (which adjusts for total transcripts in a given period) has risen QoQ and is at an all-time high."
At 10% of S&P companies that mentioned AI, software and services was the leader. That was followed by financial services 9%, healthcare equipment and services 8%, tech hardware and equipment 8%, capital goods 7% and chips 7%.
Morgan Stanley listed five metrics to indicate why AI trendspotting matters.

In calls 29 companies quantified an AI revenue opportunity, including Alphabet (GOOG) (GOOGL), AMD (AMD), IBM (IBM), Meta (META), Microsoft (MSFT), Pinterest (PINS) and Verizon (VZ). Thirty-six quantified a cost of productivity gain, including Astrazeneca (AZN), eBay (EBAY), Intel (INTC), SLB (SLB) and UnitedHealth (UNH). Twelve cited a customer service benefit, including BofA (BAC) and Wells Fargo (WFC).
"AI-based technologies could drive incremental productivity and can coincide with periods of strong top-down market returns. We noted 47 quotes from management teams at 2Q23 relating to productivity gains or efficiency in employee training."
"On the other B2C side, Google Trends continues to show a stickier-than-typical hype-cycle for AI but a drift in engagement in recent weeks."
"An alternative metric for continued enterprise engagement, adoption or simple trial-and-error in building killer apps on top of foundation AI LLMs are the frequency of downloads of open source models. This is data we track from Hugging Face, the largest repository of open source AI/transformer models, which continues to show high growth."
"As it relates to markets, using widely available AI Indices such as MSCI's, the current AI hype cycle is relatively modest by comparison to the prior peak in 2021, albeit it has broken from the typical downward trend seen after thematic bubbles burst."




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