Barclays analysts told investors in a note Thursday that artificial intelligence (AI) stocks represent a real but pricey opportunity.
The analysts explained that AI has spiked tech valuations and contributed to the narrowness of returns. However, they note that the primary beneficiaries are not extreme, and their earnings should grow into them over time.
"The US market and Tech hegemony is set to continue, but spoils are likely to accrue to a few key Tech names," the analysts said.
"Artificial intelligence, or AI, has been a major emergent narrative for risk assets in 2023," they added. "We believe that most of the near-term economic value attached to AI will accrue to a handful of key names in the foundational hardware segments of the AI value chain. While the longer-term implications are less clear, we believe that innovation and adoption at the software level will ultimately benefit primarily Tech and services-based businesses."
The analysts also stated that any retracement in AI-related stocks would present a tactical opportunity rather than a structural collapse of the trade "because multiples have not risen to historical extremes and the expanding AI economy should help its primary beneficiaries grow into their valuations over the longer term as adoption further concentrates power into the hands of a few key Tech companies."