We’re in the initial stages of a game-changing, disruptive artificial intelligence boom.
Big Tech has been investing billions of dollars into it since the world was first introduced – and blown away with Open AI’s Chat GPT.
Microsoft, for example, just invested about $13 billion in Open AI. Alphabet has reportedly invested $30 billion in AI to improve its search engine. Meta Platforms invested just over $20 billion to improve user experience on its platform. Amazon has about $10 billion invested to help improve its delivery programs and voice assistant, Alexa.
Even Apple is quietly investing on AI tools to challenge Open AI.
In fact, according to Bloomberg, Apple is working on its own AI tool called Ajax – an Apple GPT to rival its competition.
Reportedly, just like Chat GPT, it can help answer questions and summarize texts, too. And while the company has no plans to release Ajax to the public (at least, not yet), even Apple knows it’s far behind other AI giants, like Microsoft, Amazon, and Alphabet. “Apple’s devices, which produced revenue of nearly $320 billion in the last fiscal year, could suffer if the company doesn’t keep up with AI advances,” says Bloomberg.
Or, look at chipmaker, Nvidia, which just reported net income of $6.7 billion – a massive 422% increase year over year. All thanks to artificial intelligence.
But this is just the start…
According to Next Move Strategy Consulting, the AI market – currently valued at about $100 billion – could grow twenty-fold by 2030 to more than $2 trillion. All while technology massively disrupts everything about everything… and every one.
“Everything from supply chains, marketing, product making, research, analysis, and more are fields that will in some aspect adopt artificial intelligence within their business structures. Chatbots, image generating AI, and mobile applications are all among the major trends improving AI in the coming years,” as noted by Statista.
So, it comes as no surprise companies are racing for a piece of the market.
While we wait to see what Apple plans to do, the hunt is on for stocks that could explode higher on the news. We believe we’ve found three of those opportunities, which – aside from Apple (AAPL), Meta Platforms (META), Alphabet (GOOG), and Microsoft (MSFT).
Micron Technology (MU)
Micron Technology (MU) is up about 50% since the year began –and could see higher highs.
After all, the company – which develops dynamic random-access memory (RAM), flash memory, and USB drives – helps make AI possible. Even better, the company is seeing big demand for its memory chips because of AI.
“This [AI] will transform the world and guess what? Memory will be at the heart of it because without data there is no artificial intelligence. More data means sharper, better, more meaningful insights. And more data means a need for more memory, said company. The demand will help the memory and storage business grow faster than the rest of the semiconductor industry in the years ahead.”CEO Sanjay Mehrotra
Even better, Micron’s high-bandwidth memory (HBM) – a high capacity stacked DRAM, which could unlock far more powerful AI – may blow the competition out of the water. In fact, its HMB3 chip can reportedly fit 24GB of memory within eight layers of DRAM, which crushes the current 12-layer, 16 GB capacity GBM cubes.
That could allow developers to train AI models even faster than before.
Additionally, in Q3 2023 Micron beat earnings expectations with revenue of $3.8 billion, non-GAAP EPS of -$1.43, operating expenses of $866 million, $11.4 billion in cash and investments and $13.9 billion total liquidity.
And analysts like the stock here, too.
Citi, for example, just reiterated a buy rating on the stock, with a $85 price target. The firm cited a recovery in DRAM for the rating. The firm initiated a “90-day positive catalyst watch” in September, as well. “It appears DRAM pricing is “turning around” in Q3. The firm gave Micron shares, its top pick in the space, a higher multiple, saying DRAM pricing is inflecting this quarter so the stock should trade above the midpoint of the range,” as reported by Tip Ranks.
Even Barclays just raised its price target on MU to $80 from $75, with an overweight rating. The firm also raised its 2023 and 2024 estimates with signs of a recovery materializing.
Advanced Micro Devices (AMD)
For most of 2023, Advanced Micro Devices (AMD) has been impressive. Since January, the tech stock exploded from a low of about $60 to a high of $132.83 before backing off to $101.49.
Even now, AMD offers immense upside opportunity with generative artificial intelligence. In fact, with generative AI expected to grow at a CAGR of 31% to $152 billion by 2032, AMD could grab a big chunk of that moving forward.
“First, second, and third priority are around AI, AI, AI,”CEO Lisa Su, as quoted by Barron’s
“Over the last thirty days, what we’ve seen is a continued acceleration of engagements” for AI in the data center. She added that the market is “skyrocketing.”
We also have to consider the company expects to ramp up its heavily-demanded MI-300 AI chips this year to compete with Nvidia’s H-100 chips. To date, AMD has seen “very high demand” from “top-tier cloud providers, large enterprises and numerous leading AI companies” for its chips, as noted by Reuters.
In addition, earnings weren’t too shabby either. They were Nvidia-like numbers, but still impressive. AMD posted adjusted EPS of 58 cents, a penny above expectations. Revenue came in at $5.36 billion, which was slightly above expectations for $5.3 billion.
Helping, Benchmark analysts say AMD will be a big winner with the AI boom.
The firm also boosted its AMD price target to $145 from $108. All after CEO Su said she expects the market for AI accelerators – which are designed to accelerate AI and machine learning applications – to reach more than $150 billion by 2027.
“Customer interest in the company’s Instinct MI300A and MI300X GPUs was strong during the quarter, with engagements at top-tier cloud providers, large enterprises, and numerous leading AI companies significantly expanded in the quarter,” added the firm.
As the AI story unfolds, we’d like to see the AMD stock rally to at least $150 by early 2024.
No list of AI stock is complete without the 800 lb. AI gorilla – Nvidia (NVDA).
Even after a substantial run from about $142 to $439 just this year, Nvidia could push even higher. All thanks to very strong earnings, guidance, and the company’s A100 and H100 GPUs, which allow AI software to make decisions, and process information very quickly.
Helping, Nvidia and Alphabet’s Google Cloud just revealed a “new AI infrastructure and software for customers to build and deploy massive models for generative AI and speed data science workloads,” as noted by Nvidia, which gives the company another massive leg up.
Better, earnings went through the roof.
Adjusted EPS of $2.70 a share was well above expectations for $2.08. Revenue jumped 101% year over year to $13.5 billion, which was also above expectations for $11.2 billion. For the current quarter, the company expects to see revenue with a midpoint range of about $16 billion, which is also ahead of expectations. NVDA also announced plans to buy back $25 billion in stock.
Again, all thanks to the AI boom. “A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI,” Nvidia CEO Jensen Huang said, as quoted by Barron’s. “The race is on to adopt generative AI.”
We also have to consider the company is getting ready to ship 550,000 of its flagship H100 data center graphics cards this year. With those chips selling for about $30,000 a pop, the company could be on course to generate nearly $16.5 billion in revenue.