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Generative AI / LLMs could have an initial TAM of $436 billion - Macquarie

Published 2024-03-11, 01:20 p/m
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Analysts at Macquarie provided their insight into the AI software and hardware markets in a note this week. They highlighted the rapidly expanding AI landscape and noted a potentially significant total addressable market.

Macquarie said that despite the slight decline in many AI stock names on Monday, the sector continues to drive market multiple expansion and the fundamental performance that has yet to find a ceiling.

"This pull-forward of expected future value is predicated on expectations of tangible use-cases that may transform businesses, technologies, and sector," they explained.

As a result of the surging demand for AI, Macquarie believes Generative AI and LLMs (large language models) could have an initial TAM of $436 billion across knowledge workers/ enterprise use cases and education. They emphasized Microsoft (NASDAQ:MSFT), AppLovin (NASDAQ:APP), Wipro (NYSE:WIT), and SoftBank (TYO:9984) Group as stocks they like in the sector.

"Popular imaginings of an AI future gravitate towards ideas of artificial general intelligence,and initial interactions with generative AI/ LLM platforms have been fueling this recently," the firm said.

"We see a future where these platforms are not simply the difference between Google (NASDAQ:GOOGL) Search and Bing — i.e. a similar product from different companies — but where differentiation comes from the art in the algorithms that can turn written words into other mediums."

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