Investing in artificial intelligence (AI) can be overwhelming, with numerous companies benefitting from this trend. Whether it’s a company deploying AI to enhance its operations or one developing AI software, the opportunities seem endless.
However, beyond software, there are hardware components crucial to AI, and specific companies are poised to emerge as significant winners regardless of individual corporate outcomes. Here are four standout contenders projected to thrive in the years to come.
1. ASML: Leading the Microchip Manufacturing
A microchip, the heart of every computer used to create an AI model, necessitates highly specialized manufacturing machinery. ASML, listed as (NASDAQ: ASML), encompasses a significant role in this domain. The company specializes in producing lithography machines, which are responsible for creating the conductive traces on chips.
With semiconductors now featuring trace distances as minimally as 3 nanometers, ASML’s lithography machines are crucial in enhancing chip power and efficiency. Presently holding a technological monopoly in this arena, ASML is poised to emerge as a significant winner, considering its indispensable role in creating cutting-edge chips.
2. Taiwan Semiconductor: Pioneering Innovations in Chip Manufacturing
Taiwan Semiconductor (NYSE: TSM) serves as a major consumer of these lithography machines. Renowned as the globe’s largest contract chipmaker, this industry leader is consistently involved in developing cutting-edge chip technology.
With an ongoing commitment to innovation, Taiwan Semiconductor has already ventured into 3-nm chip manufacturing and anticipates the launch of 2-nm chips by 2025. Its innovative prowess is expected to yield enduring revenue gains upon the introduction of these revolutionary products.
Notable among Taiwan Semiconductor’s prominent clients are Nvidia (NASDAQ: NVDA), and AMD, whose contributions form another integral part of the AI value chain.
3. Nvidia: Crucial Role in AI Hardware
Nvidia has garnered substantial attention due to its best-in-class GPUs (graphics processing units) essential in AI development. These GPUs are utilized for processing extensive data and training AI models, positioning them as indispensable hardware.
Amid a surge in demand for GPUs, particularly evident in 2023, Nvidia witnessed an unprecedented upsurge in revenue. The sustained dominance of Nvidia’s GPUs remains contingent on the enduring prevalence of AI, given its consequential requirement for substantial computing infrastructure expansion.
4. Super Micro Computer: Specialized in AI Server Design
Merely amassing Nvidia GPUs equipped with Taiwan Semiconductor chips, produced via ASML’s lithography machines, is insufficient to ensure favorable outcomes. A specialized server is essential to ensure optimal efficiency, catering to enterprises seeking to maximize supercomputer performance.
Super Micro Computer (NASDAQ: SMCI) specializes in server design, catering to various applications such as engineering simulations, drug discovery, and AI model training. Renowned for highly configurable products, the company is well-positioned to capitalize on the escalating demand for AI computers, evident in the stock’s formidable 140% surge in early 2024.
Embracing a Diverse Array of AI Winners
Instead of focusing on a single winner, a successful AI investor could opt for a diverse stock portfolio geared towards critical AI suppliers, ensuring resilient prospects regardless of individual corporate AI product outcomes. These companies constitute foundational elements essential for all AI models.
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