Hello, Reader.
As far as hot topics go, AI development is still red-hot, and showing no signs of cooling down. (We can see this from Tim Cook’s AI announcements at the WWDC event – and Apple Inc.’s (AAPL) 13% jump – which I’ll dive in to later this week.)
The AI market itself is on the verge of explosive growth. The analysts at IDC estimate that worldwide spending on AI systems will nearly triple to $300 billion by 2026. From that level, McKinsey & Co. predicts the AI market will soar to $1 trillion by 2030.
Yes, you read that right – trillion with a “t.”
AI is an incredibly powerful – almost scarily powerful – megatrend, and the implications of its deployment will supercharge choice companies into previously unachievable milestones… including the coveted trillion-dollar market cap.
Yes, another “t.”
It’s an inconceivable number, so much so that only a handful of companies have achieved that value, including Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA), Saudi Aramco, Apple Inc. (AAPL), and Alphabet Inc. (GOOGL).
But with the power of AI, I believe that the next trillion-dollar companies are out there… and will reward their investors handsomely along the way.
So, in today’s Smart Money, I’ll share one company that I think could harness AI’s power to propel itself into the trillion-dollar club… and whether it’s a good investment.
Then, I’ll share another company that is revolutionizing the AI space.
Let’s dive in…
AI at the Ready
The company I’m talking about is Intel Corp. (INTC).
Intel already stands at the ready with a roster of offerings that can help power the AI Revolution.
The company has been building its own arsenal of AI chips for several years now. Its NCS2 chip, released in 2022, was developed specifically for deep learning; and its Gaudi2 AI chip, another 2022 release, is twice as fast as its first-generation predecessor. Chips like the Gaudi line accelerate the particular math calculations at the heart of today’s AI technology.
And Intel continues to move forward. Last week, it announced its upcoming sixth-generation Xeon chip. The Xeon 6 processors will come in both a larger, more powerful model and an “efficiency” model, which is marked to replace Intel’s older-generation chips. The latter model is now available, while the more powerful one should be available in the third quarter of this year.
Intel also noted that its Gaudi 3 processor, used for AI model training and deployment, costs much less than the chips of its competitors, namely Nvidia and Advanced Micro Devices Inc. (AMD). The Gaudi 3 accelerator kit, which includes eight of the AI chips, sells for about $125,000.
Now, Nvidia and AMD don’t reveal the price of their chips. However, according to custom server vendor Thinkmate, a comparable HGX server system with eight Nvidia H100 AI chips (the company’s flagship chip) can cost more than $300,000.
“Customers are looking for high-performance, cost-effective gen AI training and inferencing solutions,” Intel CEO Pat Gelsinger said. “And they’ve started to turn to alternatives like Gaudi. They want choice.”
But offering choice to their customers, Intel is hoping to take market share from Nvidia, which, as the current leader, has an estimated 80% of the AI chip market.
In a Prime Position
As I’ve mentioned before, Intel is also in a prime position to benefit from the AI PC upgrade cycle.
As Intel explains…
An AI PC is simply a new computer with components that are specifically designed to run powerful AI-accelerated software with great performance and quality. Without these components, AI workloads are very slow or may not run at all…
In contrast, AI software can learn, make decisions, and tackle complex creative tasks in the same way a human might. That learning capability gives you a new kind of tool that can simply do the job for you at your request, because it has been trained to do so. This fundamental difference enables AI software to automate complex tasks, offer personalized experiences, and process vast amounts of data efficiently, transforming how we interact with our computers.
In other words, the difference between a traditional PC and an AI PC is somewhat like the difference between a toolbox and a handyman. A traditional PC contains a toolbox of applications that you can use to accomplish a variety of tasks.
For example, you can compose and edit a letter in Word, or build and operate a spreadsheet in Excel. But whenever you use a tool like Word of Excel, you are the one who hammers every nail.
The AI PC is different. It hammers the nail for you. Like a handyman, it accomplishes the entire task, so you don’t have to, from start to finish.
As AI PC sales gain momentum, and Intel’s pricey foundry projects pivot from burning cash to generating it, the company’s earnings could skyrocket. Based on current long-term earnings estimates, the company will book a profit of about $1 a share this year, then jump to $1.90 next year, $2.50 in 2026, and $3.35 in 2027.
If Intel comes anywhere close to producing that earnings trajectory, its share price could double easily… or deliver even larger gains.
Success is not guaranteed, of course, but I expect the stock to reward patient investors.
Of course, Intel isn’t the only company harnessing the power of AI…
Neuralink, Elon Musk’s neurotechnology company, has created an AI device that aims to restore mobility in paralyzed people, sight to the blind, and hearing to the deaf.
And I believe Elon Musk is about to mint new millionaires with this new AI invention.
Now, Neuralink is currently a private company. However, one well-known tech company can give you some exposure to Neuralink’s growth.
Click here to learn to all of the details.
Regards,
Eric Fry
