AI Boom Spurs Search For New Winners Beyond Nvidia: Bloomberg

Investors are broadening their horizons, seeking the next wave of AI winners beyond the typical frontrunners after Nvidia Corp. NVDA reported stellar results, reflecting Wall Street’s intense focus on artificial intelligence.

There is an increasing realization that the growth of AI infrastructure will impact more than just chipmakers like Nvidia and server manufacturers such as Super Micro Computers Inc. SMCI.

Various sectors are expected to benefit, including makers of electrical components like Amphenol Corp. APH, as well as real estate investment trusts focused on data centers, which anticipate rising demand with the expansion of AI and the shift of more workloads to the cloud, Bloomberg writes.

The energy needed to power AI is also expected to benefit utilities and companies connected to the power grid.

“I never believed it would impact electricity prices this much, but people are discussing multi-gigawatt expansions,” Brian Frank, president of Frank Capital Partners, told Bloomberg.

He noted AI’s significant influence on his energy and utility stock portfolio. AI is considered the current growth engine across various sectors.

Goldman Sachs strategists highlight that hedge funds are diversifying their AI-related investments, reducing their stakes in the Magnificent Seven while increasing exposure to infrastructure and utility sub-industries.

Companies gaining popularity include Littelfuse Inc. LFUS, an electric utility AES Corp. AES, and technology supply chain services firm TD Synnex Corp. SNX.

A Goldman Sachs basket tracking growing power demand has surged 40% this year, with a 0.8% rise on Friday.

In contrast, AI-exposed hardware stocks increased by 27%, including a 0.7% gain on Friday. The Bloomberg Magnificent 7 Total Return Index has grown 24%, and the Nasdaq 100 Index has risen 11%.

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Bank of America Corp BAC asserts that AI investments are no longer solely about Nvidia, predicting a virtuous cycle of AI-related growth benefiting power, commodities, and utilities.

Less prominent AI stocks like Amphenol have climbed 40% this year, hitting record highs and splitting stocks.

AES has risen 30% since April, while TD Synnex is poised for its largest monthly gain since November 2022. Power producer Vistra Corp. VST has soared 150% as AI fuels electricity demand. AXT Inc. AXTI, a maker of compound semiconductor substrates, is up 35% this year after post-earnings rallies.

Nvidia, a key player in AI, has surged over 90% this year, underscoring robust demand.

Other major AI companies, such as Meta Platforms Inc. META, Microsoft Corp. MSFT, and Alphabet Inc. GOOGL, have also seen double-digit gains.

Despite their strong performance, greater growth potential may lie with smaller or lesser-known stocks.

Notably, while Intel Corp. INTC was larger than Nvidia as recently as 2020, their paths have diverged.

Nvidia’s market cap exceeds $2.5 trillion, compared to Intel’s $128 billion. Nvidia’s recent 9.3% rally alone added nearly $218 billion to its valuation, more than Intel’s total market value.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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