When chipmaker Nvidia says it's partnering with a company to produce an artificial intelligence (AI) product, it's probably something that investors should pay attention to. Considering that the majority of servers built for AI have Nvidia GPUs in them, it knows plenty about what's happening in that part of the computing space.
During Nvidia's Q3 conference call, it highlighted one company that it's working with to bring AI to more customers: Accenture (NYSE: ACN), the largest tech consulting firm in the world.
Nvidia CFO Colette Kress said during its conference call that Accenture created a new unit with 30,000 employees trained on Nvidia's AI technology. This makes it one of the most well-equipped companies to provide clients with the AI expertise they may lack in-house. While tech giants like Alphabet or Microsoft have huge teams devoted to this technology, companies in the banking, industrial, or oil sectors, for example, are unlikely to have those sorts of internal resources. As a result, they need to work with consulting firms like Accenture.
Accenture CEO Julie Sweet had this to say about generative AI:
In every industry, there is a challenge or opportunity that GenAI can now uniquely solve. Our deep understanding of both the industry and the technology positions us to be the best at creating real value from GenAI with our clients.
That perfectly sums up the AI-related investment thesis for Accenture, as it is set to benefit from generative AI going mainstream in the coming years. Still, it is a huge consulting firm with many areas of specialization and expertise. It isn't an AI pure-play.
But does the rest of the business plus an AI boost equal a winning investment?
A pricey stock based on the outlook
In its fiscal 2024 fourth quarter, which ended Aug. 31, Accenture saw new bookings of $20.1 billion, of which generative AI made up $1 billion. So while generative AI has clearly given the business a boost, it only accounted for 5% of total bookings, making it a relatively minor part of the larger investment picture.
Fiscal 2024 wasn't the greatest year for Accenture, as clients were conservative with their spending. Revenue rose just 3% in Q4 and only 1% for the year. The outlook for fiscal 2025 is slightly better -- management expects revenue to grow by 3% to 6% in local currencies. (As a global business headquartered in Ireland, it's exposed to changes in currency exchange rates.) Still, considering that many AI companies are boosting their revenue at much faster rates than that, is Accenture worth investing in?