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The Opportunity of Artificial Intelligence
Artificial Intelligence: A Key Technological Advance
Starboard Value's Jeff Smith believes that artificial intelligence (AI) is a significant technological advance comparable to the internet. According to Smith, AI presents an enormous opportunity for many companies, similar to previous advancements like cryptocurrency blockchain. The impact of AI has been evident in the stock market, with chipmaker Nvidia's market cap exceeding $1 trillion. Additionally, software like the chatbot ChatGPT has gained widespread popularity, highlighting the rapid growth of AI in various industries.
Advancement in Technology and Efficiency
Smith predicts that technology will continue to advance, ultimately leading to increased efficiency for companies. By harnessing the power of AI, businesses can streamline their operations and enhance their productivity. This increased efficiency will also result in a higher demand for products from companies that successfully implement AI technology. Salesforce, a software company that Smith has taken an activist stake in, is one such company that stands to benefit from the enormous opportunity presented by AI.
Potential Growth for Salesforce
Smith acknowledges the significant strides made by Salesforce, such as raising their margins by 800 basis points. While the company's revenue growth has slightly slowed, Smith remains optimistic about its potential for further growth. He predicts that Salesforce's stock can rally another 30%, driven by an expected $15 per share in free cash flow in the next couple of years. With this assessment, Smith believes that Salesforce is still undervalued and has room for further improvement.
Bullish Outlook on Splunk
In addition to Salesforce, Smith expresses bullish sentiments towards Splunk, another software company. He notes that Splunk is slightly behind Salesforce in terms of execution but presents a similar opportunity for growth. While initially focusing on revenue growth rather than profit margins, Splunk is now striving for a balance between the two. Smith predicts that Splunk can potentially double its free cash flow per share in the next couple of years, demonstrating the company's potential for significant growth.
In conclusion, Jeff Smith of Starboard Value emphasizes that artificial intelligence is an enormous opportunity for businesses. Companies like Salesforce and Splunk are well-positioned to benefit from the advancements in AI technology. As the potential for growth and profitability increases, the stock market reflects the positive sentiment surrounding these companies. By capitalizing on AI, businesses can enhance efficiency, meet rising demands, and unlock new opportunities for success.
Hot Take: The Impact of Artificial Intelligence on New Businesses
Artificial intelligence (AI) is not only a key technological advance but also a game-changer for new businesses. As highlighted by Starboard Value's Jeff Smith, AI presents an enormous opportunity for companies, comparable to previous advancements like the internet and cryptocurrency blockchain. The rapid growth of AI in various industries, evidenced by the skyrocketing market cap of companies like Nvidia, underlines its potential impact.
For new businesses, embracing AI becomes crucial to staying competitive in the rapidly evolving market. By harnessing the power of AI, startups can streamline their operations, enhance efficiency, and significantly improve productivity. This level of efficiency will not only drive growth but also create a distinct advantage in meeting the rising demands of customers.
While established companies like Salesforce and Splunk stand to benefit from AI, new businesses can also capitalize on this technology. AI enables startups to enter the market with improved processes, optimized decision-making, and enhanced customer experiences. Moreover, AI can level the playing field, allowing new businesses to compete with larger rivals by leveraging innovative AI solutions.
The bullish outlook on Salesforce and Splunk, as predicted by Smith, reflects the potential for growth and profitability in companies that embrace AI early on. Similarly, new businesses have the opportunity to enjoy significant growth by incorporating AI technology into their core operations from the start. The positive sentiment surrounding AI in the stock market further reinforces the belief in its transformative power.
In conclusion, AI presents an enormous opportunity for new businesses. By embracing this technology, they can unlock new avenues for success, achieve operational efficiency, and meet the evolving needs of customers. With AI as a competitive advantage, startups can position themselves as industry disruptors and seize opportunities for remarkable growth in the digital age.
Article First Published at: https://www.cnbc.com/2023/07/25/starboard-says-ai-is-a-huge-moment-benefiting-salesforce-and-others.html