NVIDIA is no longer the focus? AI trading has changed!

There are doubts about the slowing pace of AI innovation in the current market, but Bank of America believes that the transformation of AI technology is actually accelerating, and the market focus has shifted to the second phase of trading—software stocks and AI agents, known as Agentic AI.

In a report on November 21, Bank of America pointed out:

AI technology is developing rapidly, with new breakthroughs occurring almost daily. The capabilities of AI are extensive, including completing software engineering tasks, providing customer service, booking travel, and even being used for precision surgeries or vehicle assembly. The wave of Agentic AI will catalyze the accelerated development and deployment of AI-driven applications, as well as industrial and commercial robots.

Bank of America further noted that as AI applications become more widespread, the market focus has also shifted to the second phase of AI beneficiaries:

Do not underestimate the short-term disruptive potential of AI at this stage; the entire AI investment field, especially software stocks, is unlikely to be fully priced in. As the "AI moment" for software arrives, AI monetization is expected to begin in 2025 and become meaningful in 2026 as corporate adoption accelerates.

From Knowledge Workers to Manual Laborers, AI Applications Continue to Expand

Specifically, Bank of America pointed out that AI applications are continuing to thrive:

New, disruptive AI capabilities seem to be emerging at a weekly, if not daily, pace, and the speed of development of AI capabilities is so rapid that AI agents may complete end-to-end software engineering tasks. We expect the latest wave of Agentic AI to catalyze the accelerated development and deployment of AI-driven applications, as well as industrial and commercial robots, which may change the global economy sooner than investors expect.

Bank of America stated that advancements in AI agent technology not only improve existing tools but also give rise to new applications.

The AI software currently on display is just the tip of the iceberg of future possibilities. The models from OpenAI and Anthropic have recently demonstrated PhD-level capabilities, and Mistral's new model has excelled in visual capability tasks. Microsoft and Google have also launched new products with enhanced AI agent functionalities; Google’s Gemini AI has introduced memory features for personalization, and Perplexity has partnered with Stripe to launch the Buy With Pro shopping platform, with even the benchmarks used to evaluate model performance improving.

Bank of America emphasized that robotics is broadening the scope of AI applications:

Emerging robotic capabilities may have a disruptive impact across various sectors such as warehousing, dining, and construction. Although the growth of global industrial robot installations has not yet accelerated, it is expected that general-purpose robots will enter the market at lower costs by 2026. Notably, China accounted for 51% of new installations and 41% of operational robots in 2023Regarding the impact on the labor market, Bank of America stated:

The advancement of AI technology may affect a wide range of occupations, from knowledge workers to manual laborers. Although large-scale AI-driven labor replacement is unlikely in the short term, competition will become increasingly fierce with the proliferation of AI agents and robots. By 2030, agentic AI may fill the shortage of 10 million global healthcare workers.

Investors Shift Focus to the Second Phase of AI

Bank of America further pointed out that as AI applications become more widespread, market focus is shifting to the second phase of AI beneficiaries:

Not only semiconductor companies and large cloud service providers, but S&P index companies are increasingly mentioning AI in their earnings reports and meetings. As enterprise AI adoption increases in 2025 and accelerates in 2026, the focus will shift to the second phase of AI beneficiaries over the next year, particularly software companies. Due to their positioning in Agentic AI, Bank of America favors large companies like Microsoft, Salesforce, and Adobe, while mid-cap companies like NICE, Informatica, and Zeta are also seen as potential target companies.

Bank of America outlined three major development phases for AI beneficiaries:

Phase One: It is expected that AI beneficiaries will expand from NVIDIA to a broader semiconductor field and cloud service providers (CSPs), including large cloud service providers and data center real estate investment trusts (REITs) within the telecommunications sector.

Phase Two: Beneficiaries may expand to software companies that produce AI-driven applications, as well as technology hardware and capital goods companies that produce data center infrastructure, such as servers, networking equipment, and electrical and air conditioning equipment.

Phase Three: Beneficiaries may expand to companies that integrate AI products and services, such as consumer services companies like catering, retailers, banks and financial services companies, media and entertainment companies, and biopharmaceutical and medical device companies.