Investing.com – The enterprise AI software revolution is transforming business operations, and companies are increasingly positioning themselves to take advantage of the trend.
In a recent note, Truist Securities analysts highlighted that companies are integrating AI technologies across their software stacks to enhance productivity, data management, and cybersecurity. At the heart of this shift is the growing influence of generative AI (GenAI), which is expected to impact both the infrastructure and application layers of enterprise software.
According to the report, companies fall into two main categories when it comes to leveraging AI: those that directly acquire AI workloads, and those that leverage the technology to improve their products.
Microsoft Corporation (NASDAQ:) Mongo DB Companies like Snowflake (NYSE:), Amazon (NASDAQ:), and Snowflake Inc (NYSE:) are expected to benefit from AI workloads, largely due to their data infrastructure capabilities and partnerships with leading AI providers.
Despite recent market challenges, Snowflake is seen as a potential long-term winner, as its data warehouses are increasingly recognized as a core technology for AI initiatives. MongoDB is also well positioned, especially with its vector storage and search capabilities that are critical to AI applications.
In application software, Truist Securities highlights potential winners in three key areas: “pick and scrape,” platform vendors benefiting from upgrade cycles, and vendors integrating AI to boost productivity. Companies like Salesforce Inc (NYSE:) and Smart Sheet Company The New York Stock Exchange (NYSE:) is expected to benefit from these trends as businesses increasingly turn to AI-powered solutions to streamline workflows and improve efficiency.
Meanwhile, companies like Palo Alto Networks Inc (NASDAQ:), CrowdStrike Holdings Inc (NASDAQ:), Datadog Company (NASDAQ:) is leveraging artificial intelligence to improve its product offerings, particularly in cybersecurity.
Palo Alto Networks has already seen significant growth in AI-driven revenue, surpassing $200 million in annual recurring revenue from AI products, Truist notes. As AI adoption increases, demand for AI-powered security tools is expected to grow, expanding the market for companies in this space.
While investment in AI continues to grow, Truist Securities notes that the timeline for realizing significant value from AI has extended. Initially expected to be 2024, many companies now expect AI-powered applications to gain momentum by 2025. Despite this delay, more than 70% of companies surveyed expect to allocate 5% or more of their software budgets in 2024 to AI initiatives, underscoring the ongoing commitment to investing in AI.
Generative AI, despite its significant interest, is expected to represent only a small portion of the broader AI market. By 2027, Truist Securities expects generative AI to make up less than 10% of the $900 billion AI market. This suggests that while the focus on generative AI is important, other areas—such as data management, cybersecurity, and infrastructure—will offer greater opportunities in the long term.
Among the key challenges highlighted in the report is the lack of skilled talent and resources to effectively implement AI projects. Combined with increased regulatory scrutiny surrounding AI governance and compliance, this could pose barriers to widespread adoption of AI in the enterprise space.
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