AI wealth stocks with room to grow as capital investment in AI tech surges
artificial intelligence(artificial intelligenceThe 2020 AI revolution has sparked a multiyear investment cycle across companies. Additionally, generative AI is now permeating a variety of consumer internet applications. These trends bode well for AI wealth creation stocks.
Q1 FY24 saw a big shift in AI spending among cloud service providers and others. Amazon (Nasdaq:Amazon) and Microsoft (Nasdaq:MSFT) increased its capital spending plans, a reminder of the significant investments needed to bring AI applications and products to life. Bank of America alphabet (Nasdaq:GoogleNasdaq:Google), Meta Platform (Nasdaq:Meta) and Amazon are expected to grow by $37 billion to $145 billion in 2024.
Additionally, big technology companies are increasing their capital expenditure budgets, spending an estimated $500 billion over the next three years, according to Capital Group. This spending will be focused on chips, particularly graphics processing units (GPSs).Graphics Processors) and Application Specific Integrated Circuits (ASICAdditionally, there will also be a sizable chunk of investment in memory, servers, and networking equipment, meaning more profits will flow into these three AI wealth-creating stocks.
Marvel Technology (MRVL)
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The custom ASIC emerged as an alternative to Nvidia’s H100 and B200 GPUs. Broadcom (Nasdaq:AVGO), Marvel Technology (Nasdaq:MRVR) is the second largest company in this fast-growing luxury market with a 13-15% share.
JP Morgan analysts have touted Marvel Technology as an AI wealth-making stock. They predict the high-end ASIC market will grow to $20 billion to $30 billion. What’s more, the demand for generative AI will see this market grow at a compound annual growth rate of 20%.
Buoyed by this growth, the company’s AI revenues are likely to soar. Notably, the chipmaker is partnering with a variety of major technology companies on custom silicon. It has partnered with Google on its 5-nanometer Axion ARM CPU chips and Amazon on its 5-nanometer Tranium chips. Rumors are also circulating that it is partnering with Microsoft on its Maia chips and Amazon on its Inferentia chips.
Given these tailwinds, JPMorgan analysts believe MRVL could generate $1.6 billion to $1.8 billion in revenue from its network and custom ASICs this year. Additionally, they expect AI revenue to double next year. Moreover, most analysts are very bullish, with 28 buy ratings and an average target price of $90, indicating an upside of over 20%.
Micron Technology (MU)
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After a 10% pullback, it’s time to buy Micron Technology (Nasdaq:MThis memory manufacturer is also developing high-bandwidth memory (HBMImportantly, HBM memory reduces bottlenecks and improves the efficiency of training large language models.
Micron Technology’s stock price plunged after reporting its fiscal third-quarter 2024 earnings, but the company’s performance was strong. The company beat expectations by a large margin, reporting third-quarter revenue of $6.81 billion compared to the $6.67 billion forecast. Data centers drove the growth in AI demand, up 50% from the previous quarter.Compared to last quarter) segment. Additionally, the company gained share in higher-margin AI products such as data center solid-state drives and HBM.
Another striking highlight was that the company revealed that it had sold out of its HBM chips for 2024 and 2025. Due to strong demand, CEOCEOSanjay Mehrotra, in his third-quarter prepared remarks, noted that Micron Technology is on track for record revenue in fiscal 2024. Moreover, he expects that momentum to continue into fiscal 2025.
In fact, MU is expected to perform well in FY2025 due to AI demand, making it one of the top AI wealth creation stocks. Moreover, the continued transition from commoditized memory to high-margin AI products will boost profitability.
ASML Holdings NY (ASML)
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As demand for AI accelerates, semiconductor foundries and integrated device manufacturers are rushing to increase production capacity. ASML Holdings NY (Nasdaq:ASML), a manufacturer of EUV machines used to make chips.
There are several reasons to remain bullish on ASML: First, AI-related revenues are surging due to memory demand driven by advanced memory such as HBM and DDR5, which has resulted in the semiconductor equipment maker seeing increased orders from memory makers such as Micron Technology.
Second, the company is benefiting from increased subsidies and grants for the semiconductor sector. Incentives and grants from legislation such as the CHIPS Act and the SCIENCE Act have led chipmakers to open new facilities. For example, Micron Technology is building new factories in New York and Idaho. To accommodate this expansion, the company expects to make $8 billion in capital expenditures in 2024, increasing to the mid-30s percent of revenue in 2025.
ASML’s outlook is very bright, as nearly every foundry and integrated device manufacturer is building new chip manufacturing facilities. Taiwan Semiconductor Manufacturing (New York Stock Exchange:TSMC), Samsung Electronics and Intel (Nasdaq:International Trade CommissionASML has broken ground on new projects in the U.S. and Europe that will include equipment from ASML, making the company’s stock a good buy.
On the date of publication, Charles Muni did not hold (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the author in accordance with InvestorPlace.com’s Publishing Guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article..
