Is Salesforce’s 13% Stock Gain Just AI Hype?

In a recent appearance on CNBC’s ‘Squawk Box’, Gene Munster, managing partner at Deepwater Asset Management, provided insights into Salesforce’s (CRM) third-quarter results, the burgeoning field of digital labor through AI agents, and Amazon’s (AMZN) latest advancements in AI technology.

Salesforce’s shares saw a significant surge following the company’s decision to raise its fourth-quarter profit and revenue guidance. Despite this positive outlook, Munster pointed out some nuances in the guidance. He noted that while Salesforce did outperform expectations for the current quarter, their full-year guidance suggested a slight decrease in expectations for the upcoming January quarter. This, he argued, did not fully justify the 13% stock price increase unless one considers the broader narrative around AI’s transformative potential as articulated by CEO Marc Benioff.

During the earnings call, Benioff emphasized the rise of digital labor through AI agents, a concept Munster described as pivotal. According to him, Salesforce’s vision of integrating these AI agents into their CRM platform, under the banner of ‘Agentforce’, could redefine how businesses operate across various sectors. Munster highlighted that while the guidance might have been “punky,” investor reaction was significantly influenced by the AI narrative, suggesting that the AI trade in software investments remains robust. He foresaw a 3 to 5-year bull market in AI, albeit cautioning about a potential bubble burst in the future.

Addressing the skepticism about AI replacing human interaction in customer service, especially in scenarios where current AI systems often fail, Munster shared an optimistic view. He recounted a recent experience with a private company where the AI’s performance was so convincing it was mistaken for a human. He believes that AI will evolve to handle simpler interactions, leaving more complex, empathy-driven tasks to humans, thus enhancing efficiency without losing the human touch.

Lastly, Munster touched on developments at Amazon, particularly around AWS’s hardware announcements. He addressed concerns about Nvidia’s (NVDA) market position, noting that Amazon’s focus on accelerators rather than GPUs does not directly threaten Nvidia. Instead, he sees these innovations as complementary, reinforcing Nvidia’s role rather than displacing it.

In summary, Munster’s insights painted a picture of an AI-driven future where Salesforce could lead in integrating AI agents into business operations, potentially accelerating growth despite current guidance adjustments. Meanwhile, Amazon’s hardware moves are seen as part of the broader AI ecosystem evolution rather than competitive threats to existing players like Nvidia.

Price Action: CRM is currently trading at $361.70, marking an impressive 9.13% intraday gain. The stock opened at $366.81 and has since fluctuated between a daily low of $356.65 and a daily high of $368.70. In the broader context, CRM’s 52-week low sits at $212.00, while its 52-week high reaches $368.70.

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