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It’s not just Nvidia: AI interest sends these stocks higher

2 weeks ago 28

Attention around artificial intelligence has driven chipmaker Nvidia sharply higher in recent years, to the point where it briefly was the world’s most valuable company — but AI investors are targeting other stocks, too.

Some hardware-focused companies in the AI supply chain have seen blistering stock price gains in the past 18 months, and the process of implementing AI across large organizations is already driving business for leading software firms.

The hype has drawn comparisons to the dot-com bubble of the late 1990s, when many internet start-ups saw massive, short-lived investment gains before crashing down. But this time, some analysts say, much of the AI interest has been concentrated on a much smaller number of established technology firms, and it is linked to significant corporate spending happening now.

“The impact of generative AI is not as broad-based as initially imagined,” said Chirag Dekate, a vice president and analyst at Gartner. “There are a very specific entities that are providing the foundational technology.”

Here are some publicly traded companies riding a wave of artificial intelligence investment.

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The Idaho-based company builds memory chips, including those that are built into Nvidia’s AI-related offerings. The company recently started mass production of high-bandwidth memory chips for artificial intelligence, Reuters reported.

“You have the direct halo effect of NVIDIA’s growth impacting their own supply chain,” Dekate said, adding that Micron, as well as Samsung and Taiwan Semiconductor Manufacturing, have benefited from their ties to Nvidia.

Micron’s revenue increased to $6.81 billion in the third quarter of 2024, from $3.75 billion for the same period last year.

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This Ohio-based company provides specialized cooling systems for data centers and other digital infrastructure.

The cooling demands of AI systems have supercharged demand for its highly specialized services, said Deepwater Management managing partner Gene Munster, who called Vertiv “the industry standard for cooling [circuit] boards.”

In the first quarter of 2024 it reported a 60 percent growth in orders compared with the same quarter last year, driven by “increasing pipeline velocity and acceleration of AI-driven demand,” chief executive Giordano Albertazzi said in a release.

Palantir Technologies (PLTR)

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Co-founded by technology investor Peter Thiel, this company has evolved from an organization doing mostly defense and intelligence work into a data company serving enterprises of all sorts. Under chief executive Alex Karp, the company has built a growing suite of artificial-intelligence offerings.

It is among a growing industry that implements AI technology for large organizations, a sector that also includes C3AI and the consulting firms Deloitte, Accenture and Ernst & Young, according to Dekate.

Palantir’s platform examines a company’s data and provides examples of how AI can be employed within an organization. Wedbush Securities analyst Dan Ives said he sees Palantir as “the golden child of AI” because of its emphasis on the practical use of artificial intelligence within large organizations.

“Nvidia chips are just the start, but it all comes down to use cases,” Ives said.

Taiwan Semiconductor Manufacturing (TSM)

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The contract manufacturing giant has a ubiquitous presence in the global tech industry with its production of computer chips built into consumer products like smartphones and cars, as well as military satellites and weapons systems.

Deepwater Asset’s Munster says his firm is invested in TSMC, along with Broadcom and Vertiv, as part of a broader play to capitalize on the growth of AI-enabling hardware. A company called Onto Innovation, which handles specialized measurement for chip construction, is also seen as a niche beneficiary.

“Hardware is the play right now because we’re seeing tangible improvements to their business. … They are trading at software-like multiples,” Munster said. “The hardware for this is just getting built.”

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Analysts said all the major cloud technology providers — Amazon, Microsoft, Google and Oracle — are likely to benefit from the growth of AI as organizations spend more on specialized computing services. (Amazon founder Jeff Bezos owns The Washington Post.)

But Microsoft in particular has taken an early lead in large part through a partnership with OpenAI, the creator of ChatGPT. It has leveraged that work into OpenAI services running on its Azure cloud platform, and a chatbot called Copilot that is integrated into several Microsoft products.

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