Generative AI such as ChatGPT is experiencing rapid adoption, growing its user base to over 100 million since its launch last November
The fast-paced evolution of the technology, most recently integrating image processing, is becoming a major consideration for investors as they assess the impact on share prices of European telecom, media, and technology (TMT) stocks.
In a note assessing the impact of AI, JPMorgan reckons it presents a significant opportunity for the internet sector, including food delivery, online classifieds, and eCommerce.
Enhanced customer experiences and better distribution processes could result from leveraging ChatGPT's capabilities, potentially boosting sales.
Red flags
However, the bank also flags potential challenges for businesses that have relied on technological advancements to maintain a competitive edge. For example, companies such as Trainline PLC (LSE:TRN) that generate a substantial portion of their revenue from Google search traffic may face risks.
Within European media, JPMorgan sees companies such as RELX PLC (LSE:REL), WPP PLC (LSE:WPP), and Publicis Groupe SA as poised to unlock AI's benefits for their customers.
While there is some potential risk from automated marking, these information service providers and agencies could leverage AI for cost savings and enhanced testing capabilities.
Facing the music
Concerns over AI music impacting market share could be mitigated as digital service providers and legislators work to protect human artistry.
In the software industry, JPMorgan views generative AI as a catalyst that could drive significant productivity gains for developers.
This, it says, could present a margin tailwind as research and development make up around 15% of sales for software companies.
Companies like SAP SE could benefit as they transition customers into cloud environments, and IT Services could see a shift towards automation for repeatable workflows.
Hardware winners
In hardware, JPMorgan highlights that direct AI data centre exposure is highest at Infineon Technologies among large-cap names, accounting for about 6% of sales.
However, semiconductor capital equipment companies, ASML Holding NV (NASDAQ:ASML), ASM International, and VAT Group could see even more benefits from significant AI server capacity builds.
Alphawave IP Group PLC (LSE:AWE), the smallest semiconductor company in JPMorgan's coverage, could potentially stand to benefit the most, given that all its intellectual property and chips are exposed to the data centre.