Is ChatGPT the tip of the iceberg? Analysts reveal potential A.I. uses — and the stocks to play it

Published Tue, Feb 28 20237:24 PM EST

The launch of ChatGPT has set the artificial intelligence world alight, with the popular chatbot reportedly reaching 100 million active users just two months after its launch in November 2022. ChatGPT is considered by far the most successful generative AI tool to date. It was created by San Francisco-based OpenAI , a private company backed by Microsoft . It can answer questions, write essays , and more. "Over the last year, there has been a surge in interest in, and a staggering improvement in the performance of, so-called generative models. These are machine learning models which can produce new content, something which until recently was considered to be the unique purview of humans," HSBC's analysts, led by Mark McDonald, wrote in a note on Feb. 22. It has seen investors scrambling for opportunities in the AI space, with the likes of Microsoft and chip maker Nvidia among the most obvious stocks to play the theme. But while ChatGPT is undoubtedly the talk of the town, HSBC believes it could just be the tip of the generative AI iceberg. "With any nascent technology it is hard to predict the various ways it will ultimately end up being used productively. However, there is the potential for Generative AI to have a significant impact on several sectors of the economy," the bank said. It predicts widespread commercialization opportunities in media, Big Tech, semiconductors, healthcare, education, and the consumer and retail sectors. How to play it Morgan Stanley has named a raft of global stocks to play generative AI. "For many of our preferred plays, only a small part of their business is currently related to AI, but as technology progresses, they could become the 'picks and shovels' for building AI infrastructure," Morgan Stanley analyst Shawn Kim wrote in a note on Feb. 22. One of the bank's top picks is Taiwan Semiconductor Manufacturing Company — the world's largest contract chip maker. It is the sole foundry supplier for Nvidia's high-end graphics processing units, according to the bank. Nvidia dominates roughly 80% of the market for graphics processing units, or GPUs, which are used to speed up AI processes. Other chip stocks that made Morgan Stanley's list include Samsung Electronics and SK Hynix . In the U.S., Morgan Stanley named Apple , Seagate Technology , Dell , and IBM as tech hardware companies that could benefit from the rise of generative AI. "Over a multi-year period, generative AI could drive greater demand for more powerful compute (GPU-enabled servers, AI-integrated [personal computer central processing units] and data storage (flash & hard disk drives)," analyst Erik Woodring wrote in a note on Feb 24. Medical diagnostics Meanwhile, Canaccord Genuity in a Feb. 20 note highlighted the implications of AI on the medical diagnostics sector. "We believe there is a clear trend in the healthcare sector (including diagnostics) related to increased utilization of AI and adjacent capabilities to improve performance of medically critical tools and streamline important processes," analyst Kyle Wilson wrote in the note. "Overall, we believe AI will increasingly be used in diagnostics (and life science tools) going forward. In our view, early movers should benefit from this trend as the performance of their offerings demonstrate tangible advantages compared to those devoid of AI," he added. These early movers include Biodesix and Guardant Health , according to the investment bank. — CNBC's Michael Bloom contributed to reporting