With firms having invested billions of dollars into AI, Wall Street is antsy for a return on its investment.
As time passes, investors expect concrete monetization cases for the technology across the AI value chain.
Unfortunately, not all AI investments will pay off, according to Moody’s. They cite a complex industry with expensive technology and fierce competition.
“Rapid progress and maturing commercial offerings will drive broader adoption over time, but the sheer size of AI investment means that not all investors will achieve positive returns,” Vincent Gusdorf, head of digital finance and AI analytics at Moody’s, wrote in a recent note.
On the other hand, Moody’s believes some companies have positioned themselves for success in the AI revolution. The 13 companies identified below have created tangible competitive advantages by investing in AI infrastructure in the early stages or finding a mission-critical niche within the AI value chain.
Investing in the AI value chain
It’s still early innings for the AI revolution.
While it took several years for earlier technological revolutions like the smartphone or internet to generate products that gained traction with investors, the large language models behind ChatGPT and other AI applications have only been mainstream for less than two years.
That means definitive AI winners have yet to emerge. But according to Moody’s, there are some signs.
Investors should first understand where they’re investing in the AI value chain. According to Moody’s, the AI ecosystem is comprised of five layers.
The first is the hardware, such as semiconductors and chips, that handles AI workloads. Next is the cloud services providers, which store data and train AI models in data centers, followed by the AI foundation models that power ChatGPT. Finally, software infrastructure players assist in integrating AI models into the AI application, or end product that consumers use.
Big Tech companies with the scale and resources to operate data centers and develop AI software infrastructure are particularly well-positioned. These players hold considerable market share across multiple layers of the AI value chain, resulting in higher returns as they use AI in multiple business areas. This gives Big Tech companies an edge as the industry becomes more competitive and AI training costs continue to rise, according to Moody’s.
Big Tech certainly isn’t the only winner, though. Moody’s also identified several companies that create or help enable AI applications in high-growth niche markets.
At the end of the day, companies creating a difficult-to-replicate AI product will succeed in the AI race, Moody’s believes.
“Value will accumulate in segments with the highest barriers to entry,” Gusdorf wrote.
