Adobe (NASDAQ:ADBE) Launches AI Video Tool as Competition Intensifies

Creative software maker Adobe (ADBE) is launching a new artificial intelligence (AI) tool that’s capable of generating videos from text prompts as it races to keep up with competitors such as Meta Platforms (META) and privately held OpenAI.

Adobe, which is known for products such as Photoshop, Illustrator, and PDF files, is competing in an increasingly crowded field of companies that are introducing AI models that can both generate and edit videos and photographs using basic text prompts.

Earlier this year, OpenAI introduced an AI video tool called Sora. That news sent ADBE stock sharply lower. More recently, Meta Platforms has announced plans to introduce its own AI video tool. Adobe, whose software products are widely used by graphic designers and other creators, is rolling out Firefly Video, which will compete directly against Sora and other AI video applications.

The Threat Facing Adobe from AI

ADBE stock has fallen 17% so far in 2024, badly trailing the 24% gain in the benchmark S&P 500 index. Many analysts attribute that decline to the threat that AI poses to Adobe’s suite of creative software products. After initially dismissing the potential threat from AI, Adobe’s management team has pivoted to embracing the technology.

The adoption of AI appears to be the right strategy. Adobe has said that soft drink giant PepsiCo (PEP) will use its AI image generator to allow customers to order custom-made bottles of Pepsi and other beverages. Toymaker Mattel (MAT) is reportedly using Adobe’s AI tools to design packaging for its Barbie dolls.

Is ADBE Stock a Buy?

Adobe stock has a consensus Moderate Buy rating among 29 Wall Street analysts. That rating is based on 22 Buy, five Hold, and two Sell recommendations made in the last three months. In addition, the average ADBE price target of $621.33 implies 21.72% upside potential from current levels.

Read more analyst ratings on ADBE stock