An MIT report that said many generative AI pilots are falling flat is prompting concern about the AI-powered market rally. But it could offer good news for companies like IBM and Accenture, Evercore ISI analysts told clients Wednesday.
Just 5% of AI pilot programs from enterprises contributed "rapid revenue acceleration," while the majority stalled and offered little financial impact, according to a survey conducted by the Massachusetts Institute of Technology. The findings were first reported Monday by Fortune and have contributed to a down week overall for AI stocks like Nvidia, Palantir Technologies and Microsoft.
The report underlines fears of an AI bubble, which picked up steam after OpenAI leader Sam Altman reportedly called investors "overexcited" about AI.
But Evercore ISI analyst Amit Daryanani said in a client note Wednesday that the concerns flagged in the MIT report could offer an opportunity for tech consulting giants like IBM and Accenture. Enterprises need assistance in making their AI investments worthwhile.
"Enterprises aren't ready to deploy AI tools internally for a host of reasons — ranging from data silos and legacy IT infrastructure to operating model constraints," Daryanani wrote. "We think these bottlenecks create a unique opening for IT services firms — IBM, Accenture, Cognizant, etc. — to help enterprises overcome these hurdles and unlock value from deploying AI tools internally, generating better ROIs."
There are also opportunities for companies that can help enterprises modernize their data and IT infrastructure. Daryanani named Dell Technologies, Hewlett Packard Enterprise, Cisco Systems, Arista Networks, NetApp and Pure Storage.
Tech Stocks Take A Hit
But investors don't appear as optimistic at this point. The Nasdaq retreated on the stock market today.
IBM stock gained a half-percent to close at 242.55. Cisco also gained a fraction. But shares of Accenture, Cognizant, Dell, HPE, Arista, NetApp and Pure Storage all closed in the red.
Nvidia stock was down near 4% but regained some ground to close a fraction lower. Palantir Technologies, which has also been boosted by AI optimism, fell a sixth consecutive trading day.
Tuesday was a rocky one for AI-boosted stocks, as well.
"Tech stocks were under pressure yesterday led by AI poster child stocks Palantir and Nvidia as investors worry the tech rally is due for a pullback/correction with the constant valuation arguments front and center," Wedbush analyst Dan Ives wrote to clients Wednesday.
Ives stuck with a bullish stance, however. He wrote that it is still "the early days of the AI Revolution as the use cases are just starting to massively expand."
IBM Stock: Pullback After Q2 Results
IBM, meanwhile, remains below its 200-day moving average. Shares rallied more than 30% in the first half of the year. But IBM's Q2 results kicked off a slump that has seen the stock slide nearly 20% since the start of July.
Sales for IBM's closely watched software segment slightly missed Wall Street estimates. Technology consulting has also been a rocky sector overall this year, with the federal government cutting back on spending.
IBM stock slid under its 200-day line on Aug. 8 and remains more than 2% below the long-term investor support level.
