A group of stocks could emerge as winners as the technology rally broadens out this year, according to Baird. Further outperformance is likely in the artificial intelligence-powered rally that began last fall, the investment bank said. So far this year, tech- and tech-adjacent stocks have pushed the S & P 500 to new highs, and the Nasdaq Composite finally notched its own all-time high last week, its first in more than two years. Although the promise of profits from AI have so far driven high-flyers such as Nvidia and Super Micro Computer, analysts believe that investors may need to be more discerning this year. Tesla and Apple , for example, are off 24% and 9%, respectively, in 2024, proof that merely being AI-adjacent isn’t necessarily enough to justify lofty valuations. To try and offer up some alternate names, Baird released an updated 2024 edition of its stock picks targeting top ideas in artificial intelligence and machine learning in a 34-page report out Tuesday. “While the implications of AI vary across sectors, we collectively believe the AI tidal wave is still in the early innings,” a team of analysts led by Tristan Gerra wrote. “Thus, we are updating our list of companies that we believe have advanced AI capabilities and/or will be the biggest beneficiaries of the rise of AI-powered applications,” the firm wrote. Here are some of the names that Baird highlighted: Social media platform Pinterest was one. “We note that Pinterest was an early adopter of AI and even ahead of the Gen-AI ‘hype’ using GPUs to improve key tasks such as image recognition and content recommendations,” Baird analyst Colin Sebastian wrote. Last month, shares of Pinterest dropped after the platform issued weak forward guidance and fourth-quarter revenue that missed analysts’ estimates. Earnings, however, topped expectations. Bank of America reiterated a buy rating on Pinterest. “Given our view on acceleration and margin expansion, we see valuation as attractive vs history,” BofA wrote. Shares of Pinterest have dipped nearly 2% in 2024. Another name Baird recommended was cloud cybersecurity firm Cloudflare , which surged last month after topping analysts’ expectations in its fourth quarter. The stock is 21% higher on the year. “Though AI’s impact on NET’s revenue is still unfolding, the company is strategically positioning itself for the shift from AI training to inference,” wrote Baird analyst Shrenik Kothari. “Cloudflare’s focus on connectivity for AI applications and the optimization of its network for diverse AI use cases showcases its commitment to facilitating AI adoption and exploring new monetization avenues as the AI landscape evolves.” Customer relationship management software provider Salesforce , up nearly 20% this year, was also included in Baird’s basket. Marc Benioff’s company exceeded analysts’ expectations in its fiscal fourth quarter, but gave weak revenue guidance for fiscal 2025. Wall Street analysts have largely stood by the stock , with Goldman Sachs and Bank of America reiterating buy ratings. “We believe that Salesforce remains poised to be one of the most strategic application software companies in the $1tn+ TAM cloud industry and is on a path to $50bn in revenue,” Goldman analyst Kash Rangan said. “The pandemic has transformed how companies initiate, build and harness customer relationships digitally, making for steady demand in core products.” Other names on Baird’s list of top ideas include Adobe , Nvidia and MongoDB . — CNBC’s Michael Bloom contributed to this report.
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