Tech stocks have led the market this year; that’s no secret. The tech-heavy NASDAQ index is up about 32% year-to-date, even after recent losses S&P 500which includes a large technology segment, rose 16%.
These broad numbers obscure some important details. It is the giant tech companies that are leading the way, and among them, AI has played a prominent role in the gains. The technology rose to sudden prominence last November when OpenAI released its AI-powered chatbot ChatGPT, showing what AI is capable of.
However, they are not just conversational chatbots. AI is behind advances in autonomous vehicles, it has improved facial and voice recognition software systems, and it is widely used in digital communications and encryption systems, to name just a few of its applications.
Wall Street analysts fear all of this and more AI stocks Take a closer look and find the names that promise the biggest profit. While this list includes the tech giants, it also includes other companies from a broader range of sectors. These include some of the most obvious things, such as semiconductor chip manufacturing and data center operations.
Now let’s turn our focus to two AI-related stocks that Wall Street analysts have rated as “Strong Buys.” According to their analysis, the AI boom has not yet fully impacted these stock prices, presenting investors with an opportunity that has not yet been realized.
Marvell Technology (MRVL)
We’ll start with a chipmaker, Marvell Technology Group. Marvell is both a developer and producer of semiconductor chips and is no outsider, with a market capitalization of over $48 billion and revenue of $5.62 billion in the last 12 months. The company specializes in the design and manufacture of data infrastructure chips, developing the underlying technology that enables the movement, processing, storage and security of data in a variety of applications.
These applications include server stacks, Ethernet networks, and storage accelerators and are cloud-optimized for today’s connected digital world. Marvell has chipset product lines aimed squarely at the heart of the AI boom. The company’s technology provides the processing capabilities needed in AI-heavy applications such as data centers and self-driving vehicles, and Marvell said last spring that it expected its AI revenue to double for the year. And in the company’s most recent quarterly financial release, it reported a 6% quarter-over-quarter revenue increase in its AI-heavy data center segment.
This fiscal 2Q24 report showed that the company had total revenue of $1.34 billion. While revenue fell nearly 12% year over year – ongoing supply chain issues, the impact of inflation on sales and a slowdown in China – the company’s revenue easily beat forecast by $9.73 million. The bottom line was that non-GAAP EPS of 33 cents was also one penny per share above expectations.
5-star analyst Cody Acree, who covers Marvell for Benchmark, sees the company in a solid position, with some of the same strengths as market leader Nvidia.
“Adhering to many of the thematic end-market drivers recently highlighted by Nvidia and its extremely strong growth prospects, we believe Marvell is similarly well-positioned to benefit from industry-wide adoption of AI and changes in its customers’ data infrastructure spending plans “We believe Marvell’s leadership in data infrastructure connectivity solutions provides the company with solid leverage for the growth of global AI deployment,” said Acree.
Along with these comments, Acree rates Marvell’s shares a Buy with a $75 price target, suggesting a one-year upside potential of 35%. (To view Acree’s track record, Click here)
Tech stocks like Marvell never lack for attention on the Street – and Marvell has 20 recent analyst ratings to its name. This includes a 19-to-1 split favoring Buys over Holds to support analyst consensus of Strong Buys. The stock is selling for $55.65 and its average price target of $72.57 implies a one-year gain of 29%. (See Marvell stock forecast)
Iris energy (IRISH)
The second stock we will look at, Iris Energy, is a Bitcoin miner. That is, Iris owns large data centers needed to mine the cryptocurrency and uses its success to generate Bitcoins that can be sold for a profit. Bitcoin mining data centers are notoriously energy intensive, and Iris Energy also has sufficient power generation facilities to maintain operations. The company boasts that its electricity generation comes from renewable energy sources.
To this end, Iris built the majority of its data centers in the Canadian province of British Columbia – where the local geography, with its steep mountains and rushing rivers, is particularly well suited to the generation of clean, constantly renewable hydroelectric power. Iris currently operates three facilities in BC that use 100% renewable electricity. Their total power capacity is 160 megawatts and they are capable of supporting around 50,000 Bitcoin miner rigs. A fourth facility in Texas uses wind and solar energy to power a 20-megawatt data center with capacity for around 6,500 mining rigs.
Bitcoin efforts aside, as a company that invests heavily in data centers, Iris has a natural reason to also turn to the AI market. Iris is a large buyer of high-quality, AI-enabled processing chips for its data center server stacks.
The company will report its fourth-quarter 2023 results on Wednesday (September 13) – but a look at some recently released monthly results will give a good idea of where the company stands today. In the last month of August, Iris produced 410 Bitcoins, compared to 423 in July. The average operating hashrate for the month was 5,493 PH/s, a slight decrease from 5,562 PH/s in July. Iris generated $11.5 million in mining revenue in August, earning $27,937 per Bitcoin mined.
Iris has caught the attention of Canaccord analyst Joseph Vafi, who is drawing investors’ attention to the steps the company is taking to become a force in the AI space. He writes: “Iris has taken a step forward in its recently renewed HPC/AI strategy with the purchase of NVIDIA’s latest generation AI H100 GPUs. This initial purchase of 248 GPUs for approximately $10 million will allow the company to further evaluate the suitability of its data centers to serve the generative AI market and demonstrate its capabilities to potential customers. With 760 MW of available power capacity, next-generation data centers proven for power-dense computing, an unencumbered balance sheet, and a management team with deep energy and infrastructure expertise, we believe Iris has essential elements in place to meet the emerging challenges To use the possibilities of generative AI. ”
To that end, the 5-star analyst rates IREN stock a Buy, and his $8 price target implies a robust 82% one-year upside potential. (To view Vafi’s track record, Click here)
Overall, all four current analyst ratings here are positive, meaning Iris’s consensus rating is unanimously “Strong Buy”. The stock has a sales price of $4.40 and an average price target of $12.25, suggesting a solid 178% return is expected for the coming year. (See IREN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.
https://finance.yahoo.com/news/ai-boom-not-fully-priced-225931206.html The AI boom isn’t fully priced into these two stocks, analysts say – that’s why both are considered “strong buys”