Kevin Merritt, CFA - Director of Equity Research at Wedbush joined Benzinga's Premarket Prep team to talk AI stocks, winners and losers. You can find the full conversation on our YouTube channel.
Category
🗞
NewsTranscript
00:00Kevin Merrick, good old Director of Research at Redbush Security, thanks for joining us.
00:07So let's get to some sectors and the sector where it's been hot.
00:15Will it continue to be hot?
00:16Let's talk AI.
00:18I think it's going to continue to be a constructive backdrop for the companies that are clearly
00:23viewed as levered to the theme now.
00:27So Microsoft, NVIDIA in particular.
00:31But I do think there's going to be a fairly heated debate about who else benefits or loses.
00:37You know, IT services right now is quite a mixed bag.
00:41The likes of Accenture have had some tough quarters over the past year, Infosys doing
00:47a little bit better.
00:48There's quite a bit of debate about cannibalization versus opportunity set.
00:52I happen to think there's a good opportunity set medium term, but that's a highly debated
00:57point.
00:58And then there's other areas of software, you know, companies like Palantir are doing
01:01quite well.
01:02They're early in demonstrating ROI on use cases, whereas others, I'd say, are getting
01:08their solutions more finely polished in need time.
01:13Why would you, why do you think Accenture has kind of struggled in this backdrop?
01:16Because you would think like one of the world's biggest, you know, tech consulting firm would
01:20be, you know, getting a lot of business right now by companies that want to implement AI
01:26strategies in their businesses.
01:29And I think medium term, that'll prove to be the case.
01:32Near term, I think it's been two things.
01:33One, they overhired during COVID and there's still a hangover effect from that.
01:39And secondly, you know, there's certain portions of their portfolio that are more cyclical
01:44in nature, the end markets, and those have remained weak.
01:49So they've, you know, stuck in a bit of a position with too many folks and it's muddying
01:54the growth waters.
01:56But if long term, you know, Accenture does benefit from companies moving, you know, start
02:02from companies implementing AI solutions, like it could be, do you think it could be
02:06a good entry point here for Accenture?
02:09I do.
02:10I think it would be a really, it could be a really good medium term entry point because
02:14it's, they've had some struggles.
02:16It's more controversial at the moment, and I think we'll look back in a few years and
02:20this wave will be akin to the ERP wave or the SaaS applications wave where there was
02:28a tremendous demand from customers for assistance from the likes of Accenture.