Deutsche Bank names 6 stocks that could be beneficiaries of AI business transformation

As artificial intelligence radically reshapes the software development, fintech and professional services industries, aerospace stocks and electrical infrastructure providers are gaining safe haven status. This is Deutsche Bank's view: according to its analysts, these sectors could be among the main beneficiaries of AI adoption.

"AI will enable structural reductions in operating costs for many commercial aerospace companies, supporting higher margins throughout the economic cycle," Barron's quoted Deutsche Bank analyst Scott Deuschle as saying in a Feb. 23 note. His list of favorites included the securities of engine maker GE Aerospace, as well as components suppliers Howmet Aerospace and Heico. GE Aerospace is using AI to reduce operating costs, Howmet to improve yields, and Heico to reverse-engineer.

The second three potential beneficiaries are electrical equipment suppliers Eaton, nVent Electric and Vertiv. Deutsche Bank analyst Nicole Deblaze gave all three companies' shares a "Buy" rating this week. The rapid growth in the number of data centers will provoke a multiple increase in demand for electricity: by 2030, the volume of global capacity leased by them will grow from the current 82 to 219 gigawatts, wrote Deblaze, citing data from consulting firm McKinsey. Deutsche Bank predicts that in 2025-2030, cloud service owners and commercial data center operators will invest about $7 trillion in global data center infrastructure, of which $800 billion will go directly to electrical and mechanical equipment, according to Barron's.

Wall Street shares Deutsche Bank's optimism, with nVent, Eaton and Vertiv receiving 82% buy recommendations, and GE Aerospace, Heico and Howmet receiving 76% buy recommendations, which is above the S&P 500 index average of about 55%, Barron's notes. FactSet's Wall Street consensus ratings for all six stocks are Buy or Overweight, and their average target prices suggest upside potential ranging from 6% for GE Aerospace to 18% for nVent Electric.

It is still difficult to find companies capable of increasing margins through artificial intelligence, Barron's states. Only about 19% of U.S. companies have now implemented AI tools, and their impact on labor productivity has been "narrow," the publication reports, citing a February survey by Goldman Sachs.

Although the use of AI provided a sharp increase in productivity in software companies, it did not become a driver for their capitalization. On the contrary, the sector's securities were under pressure: State Street SPDR S&P Software & Services exchange-traded fund, which invests in a broad basket of software vendor stocks, was down 19% YTD before the start of the current week, and at the end of trading on February 23, fell another 5.1%, the article says.Global X FinTech, a sector fund tracking fintech companies, has a similar dynamic: by the opening of the session on Monday, its losses this year amounted to 24%, after which quotes fell another 4%.

This article was AI-translated and verified by a human editor