Mizuho analyst James Lee recently attended the Google Next conference and identified three key themes of Gen-AI that could unlock demand for cloud computing.
Foundational models are becoming fragmented and verticalized, so having options for models with diverse use cases or industry expertise is critical to driving adoption.
Solutions and tools are essential, as models need analytics to deploy applications internally to employees and externally to clients and 3P partners.
Data platforms with a larger ecosystem are essential because the cloud migration partner is eventually the AI platform.
With AI solutions and LLMs becoming fragmented and verticalized against a low workload penetration rate in the cloud, it affirmed his thesis that Gen-AI drives the next super cycle of workload migration. With that in mind, Lee believes that the migration cycle from 15% – 20% currently to 75% will accelerate from 10 years to 5 years.
As a result, he expects both Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) and Amazon.Com Inc (NASDAQ:AMZN) to benefit from this solid secular trend.
Lee maintained AWS as his top pick and price target of $180, with AWS revenue accelerating in the second half of FY23 and FY24 as the cloud platform’s strength in data warehousing is poised to benefit from accelerated cloud migration.
Lee maintained a buy on Alphabet and a price target of $155, with GCP leading the way with the 1P model (benefiting from Bard) for industry-specific solutions.
Price Action: AMZN shares traded higher by 0.11% at $138.00 on the last check Friday.
