Goldman says these 9 discounted stocks are part of an elite group at the forefront of boosting their sales with AI
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- Invest in businesses growing their AI-enhanced revenues, says Goldman Sachs.
- "Phase 3" AI stocks are starting to outperform AI infrastructure stocks, according to the bank.
- These 9 stocks integrating AI into their business models are trading at a discount.
Nvidia stock has clawed back its DeepSeek losses, but AI investors should be looking for opportunities beyond the chipmaker, Goldman Sachs believes.
Instead of continuing to look to Nvida for AI-related gains, consider "Phase 3" companies, or firms developing AI-enabled revenues, the bank's chief investment strategist David Kostin recommends. "Phase 1" and "Phase 2" refer to Nvidia and AI infrastructure companies, respectively.
Why is 2025 shaping up to be the year of AI monetization? For starters, companies are displaying heightened enthusiasm to incorporate it into their business models. The number of firms mentioning "AI" during quarterly earnings calls has drastically increased, from under 20% of the S&P 500 companies in 2023 to 50% in the most recent Q4 2024 earnings season.
However, actual adoption remains low: only 6% of US companies are incorporating the technology into their business models, and 10% plan to use AI in the next six months, according to the US Census Bureau. That makes now the perfect time to buy into the Phase 3 trade before it becomes the next big trend in the market, the bank said.
There are some signs that this shift is happening. In recent months, AI beneficiaries have outperformed AI infrastructure companies when comparing indexed returns to the performance of the equal-weigh S&P 500.
And while DeepSeek might have sent shockwaves through the market by sparking an AI sell-off, it could actually be a tailwind for Phase 3 companies, said Sumali Sanyal, managing director and senior PM for systematic global equities at Xponance.
Inference costs, or the computation expenses required to run AI models in real-world applications, are significant for firms right now. New entrants like DeepSeek introduce more efficient models and increase competition in the AI market, which will help bring costs down.
"Those costs are going to come down dramatically and that's going to open up the opportunity set for many smaller companies," Sanyal told BI. That means the AI trade will no longer be constrained to mega-cap tech companies.
Software companies are leading the charge in adopting AI into their business models, with 15 out of the 27 stocks Goldman Sachs identified as Phase 3 being from that industry. An additional five stocks belonged to the IT services industry.
"Going forward, the expectation is that the software and services companies will start adopting generative AI to enhance their existing models, design new industry applications, and start improving coding efficiency," Sanyal said. Human resources, customer relationship management, and cybersecurity are examples of areas within software where Sanyal is seeing the most adoption.
Unlike Nvidia, some stocks in Goldman Sachs' basket of Phase 3 companies didn't get much love from investors in 2024. Nine of them saw a price decline last year, while the overall S&P 500 rose over 23%. The stocks are listed below, along with their 2025 estimated sales growth and executive commentary from their most recent earnings calls.
Markets Insider
Ticker: DT
2024 return: -1%
2025 estimated sales growth: 15%
Earnings commentary: "The core of the Dynatrace platform is a massive parallel processing, highly performant data store called Grail that maintains all observability, security, and business data types: logs, metrics, traces, real user data, and importantly, business events, all in context. Grail then enables us to uniquely apply AI to analyze billions of interconnected data points in real time to deliver answers, not just data and not just dashboards. We then leverage our contextual analytics and AI insights to automate responses and help avoid incidents."
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Ticker: UBER
2024 return: -2%
2025 estimated sales growth: 15%
Earnings commentary: "The key takeaway is that while AV [autonomous vehicle] technology is advancing, commercialization will take significantly longer, and we have conviction that Uber will be the indispensable go-to-market partner for AV players. This is undoubtedly one of our top priorities, and we're investing a lot of technical, strategic, and management attention to this topic with lots more to come."
Markets Insider
Ticker: DOCN
2024 return: -7%
2025 estimated sales growth: 13%
Earnings commentary: "We are also innovating rapidly in the platform and application pillars to make it easy for our customers to use GenAI at scale without requiring deep AI/ML expertise."
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Ticker: GTLB
2024 return: -10%
2025 estimated sales growth: 25%
Earnings commentary: "On the AI front, we continue to build momentum with GitLab Duo Pro and Enterprise. Customers are realizing tangible value with it. One recently told us that 40% of their developers are saving more than 2 hours per week with Duo and another customer is seeing productivity improvements of up to 50%."
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Ticker: ZS
2024 return: -19%
2025 estimated sales growth: 21%
Earnings commentary: "We recently delivered several AI innovations and are continuing to expand our AI portfolio in the following three areas of high customer interest. First, securing use of AI applications for faster and safer adoption of public and private AI applications. We enable customers to securely adopt public AI apps, such as ChatGPT, Microsoft Copilot, and GitHub Copilot, with Zscaler for Copilots."
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Ticker: SNOW
2024 return: -22%
2025 estimated sales growth: 29%
Earnings commentary: "As of the end of Q3, we have over a thousand deployed use cases, which you can think of as individual projects we manage with our customers of our AI and ML products in production deployments. More than 3,200 accounts are now using our AI and ML features."
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Ticker: ADBE
2024 return: -25%
2025 estimated sales growth: 9%
Earnings commentary: "We hit several new milestones with our AI innovations, enabling us to add more than $2 billion in Digital Media net new ARR and surpass $1 billion in the ending book of business for Adobe Experience Platform and native apps."
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Ticker: BASE
2024 return: -31%
2025 estimated sales growth: 14%
Earnings commentary: "Our new AI services are designed to empower enterprises to address these challenges head-on and include model hosting, automated vectorization, unstructured data pre-processing, and AI agent catalog services."
Markets Insider
Ticker: MDB
2024 return: -43%
2025 estimated sales growth: 17%
Earnings commentary: "We continue investing in our product capabilities, including enterprise-grade Atlas Vector search functionality to build on this momentum and even better position MongoDB to capture the AI opportunity."
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