The surge in artificial intelligence (AI) adoption has sparked a significant investment cycle in the corporate world, with generative AI making its way into various consumer internet applications. This trend has led to a positive outlook for AI wealth-building stocks. In the first quarter of fiscal year 2024, cloud service providers such as Amazon and Microsoft announced plans to increase their capital expenditure, shedding light on the substantial investments required to bring AI applications and products to fruition. Bank of America predicts that capex for Alphabet, Meta Platforms, and Amazon will rise by $37 billion in 2024, reaching a total of $145 billion. Additionally, big tech giants are expected to spend approximately $500 billion over the next three years, primarily on chips like graphics processing units (GPUs) and application-specific integrated circuits (ASICs), as well as memory, servers, and network equipment. This increased spending is set to drive profits for these AI wealth-building stocks.
Marvell Technology, a major player in the high-end market for custom ASICs, has emerged as a viable alternative to Nvidia’s GPUs. With a 13-15% market share, Marvell Technology is the second-largest player in this rapidly growing sector after Broadcom. JPMorgan analysts are optimistic about Marvell Technology’s prospects as one of the top AI wealth-building stocks to invest in. They anticipate that the high-end ASIC market will reach a value of $20 to $30 billion, with a compounded annual growth rate of 20% driven by demand from generative AI. This growth trajectory could lead to a significant increase in the company’s AI revenues. Marvell Technology is actively collaborating with various big tech companies on custom silicon, including Google, Amazon, and potentially Microsoft. JPMorgan analysts project that Marvell Technology could generate revenues of $1.6 to $1.8 billion from networking and custom ASICs this year, with expectations of doubling AI revenues next year. The stock has received overwhelmingly positive ratings from analysts, with 28 buy ratings and a median price target of $90, indicating a potential upside of over 20%.
Micron Technology, known for its high bandwidth memory (HBM), is another AI wealth-building stock that stands out in the market. Despite experiencing a 10% pullback, Micron Technology remains well-positioned due to the efficiency gains offered by HBM memory, which reduces bottlenecks and enhances training efficiency for large language models. The company’s Q3 FY 2024 earnings report exceeded expectations, with revenues of $6.81 billion, surpassing estimates of $6.67 billion. The data center segment drove this strong performance, with a 50% quarter-over-quarter growth attributed to AI demand. Micron Technology has also increased its market share in high-margin AI products such as data center solid-state drives and HBM. Notably, the company revealed that HBM chips are sold out for 2024 and 2025, indicating robust demand. CEO Sanjay Mehrotra expects record revenues for FY 2024 and anticipates this momentum to continue into FY 2025. With the ongoing shift from commoditized memory to high-margin AI products, Micron Technology is poised for a successful FY 2025, solidifying its position as one of the top AI wealth-building stocks.
ASML Holding N.Y., the manufacturer of EUV machines used in chip manufacturing, is well-positioned to benefit from the increasing demand for AI. As semiconductor foundries and integrated device manufacturers scramble to expand their capacity, ASML Holding N.Y. stands to gain. The company’s bullish outlook is supported by several factors. Firstly, AI-related revenue is soaring due to the demand for advanced memories like HBM and DDR5, leading to increased orders from memory makers such as Micron Technology. Secondly, ASML Holding N.Y. benefits from subsidies and grants provided to the semiconductor sector, with chip manufacturers opening new facilities in response to these incentives. Notable examples include Micron Technology’s construction of new fabs in New York and Idaho, with a planned capex of $8 billion in 2024. ASML Holding N.Y. is expected to supply equipment to these new facilities, making it an attractive investment opportunity. Major players like Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel have also initiated new projects in the U.S. and Europe, further driving demand for ASML equipment.