AI’s Backbone: 3 Key Stock Plays for the Artificial Intelligence Revolution
Only a few AI stocks have rallied tremendously due to the AI revolution. The Street is showering Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT) and Super Micro (NASDAQ:SMCI) with the majority of the benefits from the boom. But the reality is that hundreds if not thousands of companies are benefiting considerably from the proliferation of AI.
Some of the biggest beneficiaries will be the firms that provide the physical infrastructure that enables the technology. In addition, companies in the chip sector are also getting a big lift from the trend. For investors who want to profit from the huge growth of these players, here are three AI stocks to buy.
ASML (ASML)
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Netherlands-based ASML (NASDAQ:ASML) provides ultraviolet (EUV) lithography systems which are used in the process of making chips. And of course, AI needs this style of chip to function.
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Nvidia, which makes the lion’s share of chips that create AI, utilizes ASML’s products.
In Q4 2023, the firm’s net sales climbed to 7.24 billion euros from 6.67 billion euros in Q3. Meanwhile, its net income jumped to 2.05 billion euros from 1.89 billion euros. Additionally, the firm’s net bookings soared to 9.2 billion euros from 2.6 billion euros.
Equinix (EQIX)
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Equinix (NASDAQ:EQIX) reports that it owns and operates a network of 250 data centers located in 71 major metros around the world.
The firm’s Q4 results indicate that it is already benefiting considerably from the AI boom. Its sales rose an impressive 13% versus the same period a year earlier while its operating income jumped 20% year-over-year to $1.44 billion. Also noteworthy is that EQIX expects its EBITDA, excluding certain items, to climb a healthy 10%-13% this year.
Further, last quarter 185 institutional investors purchased 671,000 shares of the stock, while just 71 institutions unloaded slightly over 600,000 shares.
Fluor (FLR)
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In May 2023, before the AI boom was really in full swing, research firm Arizton estimated that the global data center construction market would expand at a rather robust CAGR of 6.5% between 2022 and 2028. Internet of things, big data, 5G and the growth of cloud computing should all contribute to the proliferation of data centers, the firm stated. Fluor (NYSE:FLR) should be a major beneficiary of the construction of new data centers over the longer term. The firm claims that it designs, engineers and constructs innovative data centers. It adds that the demand for data centers is growing fast.
Moreover, on the firm’s Q4 earnings call, CEO David Constable reported that FLR is definitely focused on data centers. And, that the data and data processing that utilize data centers is going to be a big market for the company.
The CEO further stated that the company is already involved in big data center projects in Asia. Finally, he indicated that the firm would also get a boost from building infrastructure that will power data centers.
The forward price-earnings ratio of FLR stock is a rather low 14.
On the date of publication, Larry Ramer held a long position in SMCI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.
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