When most people think of artificial intelligence (AI), they think of chatbots like ChatGPT and the recently released Bard. alphabetGoogle. This is not surprising, as this software is for consumers. But these platforms wouldn’t exist without the advanced semiconductor hardware used to train each AI model.
In fact, investors may find that some of the biggest AI opportunities in the next few years are in the hardware space, where companies are racing to build the infrastructure that supports advanced technology.
Let’s take a look at five stocks related to the AI hardware space, starting with names most investors will already be familiar with.
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1. Nvidia
Rising hype about AI helped Nvidia (NVDA -1.90%) It’s become synonymous with AI this year, but our history with this technology goes back even further. In fact, Nvidia delivered its first AI supercomputer to his OpenAI in 2016, and since then Nvidia’s graphics processing unit (GPU) chips have been used to train his ChatGPT platform. .
Nvidia CEO Jensen Huang estimates that there is currently $1 trillion worth of data center infrastructure in use that needs to be upgraded to support high-speed computing and AI, and his company It has an estimated 90% market share in this segment.
As a result, the world’s largest cloud providers are scrambling to acquire Nvidia hardware, while others are partnering with chipmakers to bring their own DGX supercomputers to customers. This will give millions of commercial enterprises access to the computing power they need to train AI models without investing billions of dollars in infrastructure.
Nvidia’s stock has soared 190% this year, officially surpassing $1 trillion in valuation.Price earnings ratio (PER) exceeded 139 times four times is more expensive than the 31PER of Nasdaq-100 index. Investors interested in this stock should therefore be cautious in the short term. But in the long run, I think Nvidia could end up being the biggest company in the world.
2. Axcelis Technologies
Axcelis Technologies (ACLS -0.92%) is a much smaller company than Nvidia, valued at just $5.4 billion, but its stock has more than doubled this year on the back of its incredibly strong performance. Axcelis does not generate chips. The company is a semiconductor services company that manufactures ion implanters that are integral to the manufacturing process.
The world’s largest chip makers will likely need hardware from companies like Axcelis to expand their production capacity as AI adoption increases. In fact, in the past 12 months, Axcelis has been overwhelmed with orders and has a record backlog worth $1.27 billion.
The company posted revenue of $922 million in 2022, a year-on-year growth of 38%, while many other semiconductor companies succumbed to the widespread economic slowdown. This year, Axcelis continues to fill its backlog of orders, with earnings he expects to be $1.03 billion (recently raised).
At just 29.2 times earnings, the stock is still very attractive as it trades slightly below the Nasdaq 100. As a result, this could be a great time for investors to buy, despite having already seen a significant rally this year.
3. Micron Technology
micron technology (MU -1.46%) It didn’t get much attention this year as investors turned to semiconductor makers like Nvidia, which makes powerful graphics processors for AI workloads. Micron, on the other hand, is the world’s leading manufacturer of memory (DRAM) and storage (NAND) chips used in everything from smartphones to data centers to electric vehicles.
But Micron says AI servers require up to eight times more DRAM content and up to three times more storage than regular servers, so the company could also benefit from broader deployment of AI in the long term. It is said to be expensive. In other words, don’t sleep on the future of this stock.
In the short term, Micron is grappling with the challenges of the consumer space, which has slowed significantly as the recent economic downturn has made people simply less likely to buy computers and devices. As a result, Micron realized it had too much inventory and was forced to cut prices and take a loss. This resulted in a significant 52% drop in the company’s revenue in the second quarter of 2023 (ending March 2) (compared to the same period last year).
Micron is also cutting jobs and cutting costs across the board, but here’s the good news. The company believes inventory has peaked. As a result, the company’s financial performance should improve noticeably in the coming quarters. The company’s stock is also down 32% from its all-time high, which could present a good opportunity for investors to buy ahead of the inevitable AI-driven demand tailwinds in the years ahead.
4. Corf
corf (Coffee -2.57%) is a semiconductor services company much like Axcelis Technologies, but it manufactures test and handling equipment designed to speed up the quality control process while maintaining accuracy so the end user gets a fully functional chip. The difference is that Semiconductors are constantly shrinking in size while producing more output, resulting in highly complex manufacturing processes. Therefore, advanced technology is required to ensure that hardware is properly tested and free of defects.
Cohu uses true infrared light to see through silicon and detect subsurface structural cracks that are invisible to the naked eye. And using AI algorithms, he can identify scratches as small as 5 micrometers, instantly distinguishing harmless cosmetic problems from serious cracks.
Cohu is also a leader in thermal handlers that regulate temperatures under test conditions for high-performance data center chips used for AI applications, which could be a profitable source of demand in the future.
Wall Street analysts expect Korf’s revenue to fall 14% to $695 million in 2023 amid a tough economic environment, but the company has told investors it could grow in the next three years. It has the potential to reach $1 billion in average annual sales, he said. As a result, the company’s next stage of growth could be just around the corner.
5. Advanced Micro Devices (AMD)
Advanced Micro Devices (AMD -0.62%) is one of the industry’s most popular chip makers, with its hardware powering many high-profile consumer products, including: SonyPlayStation 5 and microsoftXbox. But it has also emerged as Nvidia’s main competitor in AI chips built for data centers.
Earlier this month, the company revealed detailed specifications for its new MI300 chip. The chip is already set to power the world’s most powerful supercomputer, El Capitan, when it goes live later this year. Additionally, rumors are already circulating that his provider, the world’s largest cloud service, may be interested in the MI300 after spending years as one of Nvidia’s most loyal customers.
The chip comes in multiple configurations, including a first-of-its-kind advanced processing unit that combines central processing unit (CPU) and GPU hardware. It can also be purchased as a standalone GPU, which is what most customers want. However, it is designed to require minimal adjustments to your existing data center infrastructure to make the upgrade process nearly seamless.
The MI300 could be a game changer for AMD, which is looking to shave off Nvidia’s dominant market share in this space. AMD’s stock is up 75% year-to-date, but is still 27% below its all-time high. Longer term, I think the company could skyrocket to more than 5x his, putting it in his trillion-dollar club alongside NVIDIA.
