This car company made it on to Citi's top AI stocks list and it is not Tesla

This car company made it on to Citi's top AI stocks list and it is not Tesla
Credit: © Reuters.

Citi analysts reiterated a positive medium-term outlook on the artificial intelligence (AI) theme as Wall Street continues to position itself for a business transformation that is taking place around the globe.

They especially highlighted the free cash flow (FCF) aspect that AI strengthens, in addition to the fact that GenAI is “positively impacting near- and longer-term EPS estimates as some monetization strategies come out earlier than expected.”

“Investors may be overlooking free cash flow. Profitable stocks within this theme are already impressive cash generating machines. Recent AI developments should accentuate this characteristic and push FCF margins and growth to new highs,” analysts said in a client note.

As a result, Citi strategists highlighted a number of AI-exposed stocks that are expected to outpace their market-implied growth expectations and see FCF margins rise in the near term.

Names that made it on to the list include Amazon (NASDAQ: AMZN ), Alphabet (NASDAQ: GOOGL ), Mastercard (NYSE: MA ), ServiceNow (NYSE: NOW ), and NXP Semiconductors (NASDAQ: NXPI ).

“Overall, at the single stock and aggregate level, we believe it is fair to say expectations are quite lofty for AI. However, strong fundamental tailwinds mean this lofty expectation could actually be met by companies. While the AI trade is no longer in its infancy given strong year-to-date moves, prices are still below prior peaks even though fundamental trajectories are much more impressive and visible for some names given generative AI development and applications,” analysts concluded.

The only car manufacturer on the list is Ford Motor (NYSE: F ).

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