William Blair analysts told investors in a note Wednesday that generative AI (GAI) is a game changer, with near-term beneficiaries likely to be hyper-scalers Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT).
"In contrast to traditional artificial intelligence (AI), which focuses on pattern detection, generative AI (as the name suggests) can generate new content on its own (new text, images, audio, software code, etc.) after being trained by a machine learning model," the analysts explained in their research piece.
"This ability to generate new content on its own is what makes GAI so powerful, mimicking the learning and creative capabilities of the human brain."
The analysts warned investors not to dismiss GAI as just hype, as they believe it is "fundamentally different" from other new technologies that generate a lot of hype.
"Beyond the power and simplicity of the technology from an end-user perspective, the reason we believe that GAI is so transformative is its applicability to virtually all industry sectors and its potential to fuel a new wave of productivity and innovation in the global economy," they added.
"We expect multiple winners in GAI. Near-term beneficiaries from GAI are likely to be hyper-scalers Alphabet, Meta, and Microsoft (and by extension OpenAI), which have the voluminous proprietary datasets and at-scale cloud platforms to train large language models deliver GAI services—cloud infrastructure scale, in particular, we see as a near-term competitive moat given the high cost of training models and hardware supply constraints."
On what they describe as the "picks and shovels" side, William Blair analysts said they see NVIDIA (NASDAQ:NVDA) as the most obvious winner given its dominance in GPUs and related AI software.