Artificial intelligence (AI) is no longer just a buzzword; it’s poised to be a driving force in the global economy. In a game-changing report published in June, Swiss investment bank UBS projected that AI will inject a staggering $1.2 trillion annually into the global economy by 2027. This isn’t just a tech trend; it’s a financial revolution that could eclipse anything we’ve seen before. UBS analysts divided the AI value chain into three layers, each ripe with potential and set to redefine industries:
- Enabling Layer: This layer includes companies providing the chips and data center infrastructure essential for training AI models and building applications. It’s expected to rake in $516 billion annually by 2027.
- Intelligence Layer: Companies in this segment offer data management tools and AI models critical for application development, with annual revenues projected to hit $255 billion by 2027.
- Application Layer: These companies leverage large language models and other machine learning technologies to develop AI products, forecasted to generate $395 billion annually by 2027.
UBS boldly declares that “AI will be the most profound innovation and one of the largest investment opportunities in human history.” While the application layer promises significant long-term monetization, UBS believes the enabling layer will be the prime benefactor over the next three years. Leading this charge are Nvidia (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), and Super Micro Computer (NASDAQ: SMCI).
1. Nvidia: The Unstoppable AI Juggernaut
Nvidia’s graphics processing units (GPUs) are the backbone of AI, accelerating complex data center workloads like never before. Forrester Research affirms, “Nvidia sets the pace for AI infrastructure worldwide. Without Nvidia GPUs, modern AI wouldn’t be possible.”
Nvidia isn’t resting on its laurels; it’s diversifying into central processing units (CPUs), networking equipment, subscription software, and cloud services. Goldman Sachs’ Toshiya Hari highlights Nvidia’s unrivaled position: “Nvidia will remain the de facto industry standard for the foreseeable future given its competitive advantage that spans hardware and software capabilities.”
Wall Street predicts Nvidia’s non-GAAP earnings per share (EPS) will soar by 38% annually through fiscal 2027. Despite its lofty valuation of 66.7 times adjusted earnings, Nvidia remains a smart bet for investors eager to ride the AI wave.
2. Broadcom: The Silent Powerhouse of AI
Broadcom might not grab headlines like Nvidia, but its role in the AI ecosystem is pivotal. Known for its dominance in data center networking chips (for switches and routers) and application-specific integrated circuits (ASICs), Broadcom commands an 80% market share in networking chips and at least 55% in ASICs.
Broadcom’s high-speed chips are crucial for AI, facilitating massive data throughput. JPMorgan Chase projects a 20% to 30% annual growth in spending on data center networking chips. Additionally, ASICs, which currently account for less than 10% of AI chips, are expected to outpace GPU sales and represent 30% of AI chips by 2027, according to UBS.
Wall Street forecasts Broadcom’s non-GAAP EPS will grow at 21% annually through fiscal 2027. With a valuation of 36.7 times adjusted earnings, Broadcom is a hidden gem in the AI gold rush.
3. Super Micro Computer: The Agile Innovator
Super Micro Computer builds high-performance computing platforms for data centers, specializing in servers and storage systems tailored for AI and analytics. Its modular design and in-house manufacturing capabilities allow it to quickly adapt and roll out cutting-edge technology.
Supermicro’s ability to quickly bring new products to market is a significant advantage. Rosenblatt Securities’ Hans Mosesmann notes, “Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out from Nvidia, AMD, or Intel.”
In 2023, Supermicro held a 10% share of AI server sales, with Bank of America projecting this to reach 17% by 2026. Tom Blakely of KeyBanc goes further, forecasting a 23% share by 2025. JPMorgan Chase predicts the AI server market will explode, growing by 460% between 2023 and 2027.
Wall Street expects Supermicro’s non-GAAP EPS to climb by 41% annually through fiscal 2026. With a valuation of 42.3 times adjusted earnings, Supermicro is well-positioned to deliver impressive returns. Investors should watch competitors but can expect Supermicro to continue its upward trajectory.
Conclusion: Embrace the AI Revolution
The AI revolution is more than just a technological leap; it’s a seismic shift that presents unparalleled investment opportunities. Nvidia, Broadcom, and Super Micro Computer are at the forefront of this transformation, each uniquely positioned to capitalize on the AI boom. As AI reshapes the global economy, these companies are set to deliver remarkable returns, making them essential picks for any forward-thinking investor. The future isn’t just coming—it’s here, and it’s powered by AI.
Stock to Watch: iQSTEL Inc. (IQST) skyrockets towards a quarter-billion in revenue, marking a ‘hockey stick growth’ with its strategic acquisition of QXTEL, setting the stage for unparalleled market dominance.
