Tech stocks have been leading the market this year; This is not a secret. The tech-heavy NASDAQ index, even after recent losses, has a year-to-date gain of ~32%, and 2018 S&P 500It rose 16 percent, which includes a large technology segment.
Those broad numbers cover some important digs. Leading the way are the tech giants, among which AI has played a significant role in communication. The technology started last November when OpenAI released its ChatGPT AI-powered chatbot and demonstrated what AI can do.
But they’re not just conversational chatbots. AI is behind the development of autonomous vehicles, has improved facial and speech recognition software systems, and is widely used in digital communication and encryption systems, to name just a few.
All this and more Wall Street analysts put AI stocks Under the microscope, looking for the names that stand out for maximum benefit. While this list includes the tech giants, it also includes other firms in various fields. These include some obvious things like semiconductor chip manufacturing and data center operations.
Now, let’s turn our attention to two AI-related stocks that Wall Street analysts have named strong buys. According to their analysis, the AI boom has not fully impacted these stock prices, presenting investors with an opportunity that has yet to be played.
Marvel TechnologyMorley)
We start with chip maker, Marvell Technology Group. Marvell is a designer and producer of semiconductor chips, and currently has a market cap of over $48 billion and trailing 12-month revenue of $5.62 billion. The company specializes in the design and manufacture of chips for data infrastructures and creates the foundational technology that enables data movement, processing, storage and data security in a variety of applications.
Those applications are server stacks, Ethernet networks, storage accelerators and cloud-optimized for today’s connected digital world. Marvell has a lineup of chipsets aimed 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 cars, and Marvell said last spring it expected its AI revenue to double for the year. And, in the company’s latest quarterly financial release, it reported a 6% quarter-on-quarter revenue increase in its AI-heavy data center segment.
That report, for fiscal 2Q24, shows the company brought in $1.34 billion in total revenue. Down nearly 12 percent year-over-year — supply chain issues, inflation’s impact on sales and a slowdown in China all had an impact — the company’s top line narrowly beat forecasts by $9.73 million. On the bottom line, non-GAAP EPS of 33-cents was also better than expected, per cent per share.
Covering Marvel for Benchmark, 5-Star analyst Cody Acre sees the company in a strong position, with similar strengths to market leader Nvidia.
“Echoing many of the same thematic end-market drivers recently expressed by NVIDIA and its extremely strong growth outlook, we believe Marvell is similarly well-positioned to benefit from industry-wide AI adoption and the shift in their customers’ data infrastructure spending plans. Driven by transformational network architecture decisions… We believe Marvell’s leadership in data infrastructure connectivity solutions will give the company a strong advantage in its global AI implementation.
Along with these comments, Acres gave Marvel shares a buy rating and a $75 price target, implying a one-year upside potential of 35%. (To see Akren’s record, Click here)
Tech stocks like Marvell don’t need attention from the street — and Marvell has 20 recent analyst reviews. These include a 19-to-1 breakdown in favor of a strong buy deal from analysts over states. The stock is trading at $55.65 and the average price target is $72.57, indicating a 29% gain over a one-year horizon. (look out Marvell stock forecast)
Iris Energy (Iron)
The second stock we’re looking at is Iris Energy, a bitcoin miner. That is, Iris owns the large-scale data centers needed to mine the cryptocurrency and uses the success to generate bitcoins that can be traded for income. Bitcoin mining data centers are notoriously energy intensive, and Iris Energy has sufficient power generation facilities to sustain operations. The company boasts that its power generation comes from renewable energy sources.
To that end, Iris has established most of its data centers in the Canadian province of British Columbia – the local geography, steep mountains and fast rivers, are particularly conducive to generating clean, renewable, hydroelectric power. Iris currently has three facilities online in BC using 100% renewable energy. Their combined power capacity is 160 megawatts and can support around 50,000 Bitcoin mining rigs. A fourth facility in Texas will use wind and solar power to power a 20-megawatt data center with a capacity of 6,500 miners.
Bitcoin aside, a company that has invested heavily in data centers, Iris has a natural reason to move into the AI market. Iris is a major buyer of high-end AI-enabled processing chips for its data center server stack.
The company will report its results for fiscal 4Q23 on Wednesday (September 13) – but a look at some of the most recently released monthly results gives a good idea of where the company stands today. Last month in August, Iris produced 410 bitcoins, compared to 423 in July. The average operational hashrate for the month was 5,493 PH/s, down slightly from 5,562 PH/s in July. Iris generated $11.5 million in mining revenue for August, with $27,937 per bitcoin mined.
Iris has caught the eye of Canaccord analyst Joseph Vaffin, which is bringing investor attention to the company’s position as a force in the AI space. He wrote, “Iris recently took a step forward in its renewed HPC/AI strategy by purchasing NVadi’s latest generation AI H100 GPUs. This initial purchase of 248 GPUs for ~$10M will allow the company to assess the readiness of its data centers for the generative AI market and demonstrate its capabilities to actual customers. With 760MW of power capacity, next-generation data centers proven for power-dense computing, outstanding balance sheets, and a management team with deep expertise in power and infrastructure, we think Iris has the necessary components to capitalize on the emerging generative AI opportunity. “
To that end, the 5-star analyst rates IREN a buy, and the $8 price target indicates a strong one-year upside potential of 82 percent. (To view Vaffin’s record, Click here)
Overall, all four recent analysts here are positive, giving Iris a Strong Buy Consensus rating by one vote. The stock has a price target of $4.40 and an average price target of $12.25, suggesting strong 178% returns in store for the next year. (look out IREN stock forecast)
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Disclaimer: The opinions expressed in this article are those of the featured analysts only. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.
