Hello, Reader.
Has Nvidia Corp.’s (NVDA) unbeatable, dazzling market performance created an Emerald City-like allure?
On Wednesday, Nvidia released its fourth-quarter earnings report. This came after a volatile start of the year, with the release of Chinese AI DeepSeek-R1 about a month ago causing Nvidia’s shares to decline nearly 17%.
The company’s shares have continued to struggle since then, with the stock dropping 9% over five trading sessions ending Tuesday this week.
Nevertheless, Nvidia reported earnings that topped Wall Street expectations… again. The company’s revenue for the fourth quarter came in at $39.33 billion, up 3.08% from estimates, while earnings per share reached $0.89 adjusted, beating Wall Street’s prediction by 5.22%.
But despite delivering earnings beat as well as strong first-quarter guidance, Nvidia’s shares fell 8% the next day.
Even so, Nvidia is undoubtedly today’s AI darling, but as Dorothy learned in Oz, even the most powerful wizards eventually step from behind the curtain. While the company’s recent numbers still have them on top, investors should start considering companies that will eventually inherit Nvidia’s momentum – the AI Appliers.
AI Appliers take foundational tech breakthroughs – like Nvidia AI chips – and profit off utilizing them. Some companies use AI to enhance businesses, while others provide the energy AI needs to run.
These are the companies now set to produce strong investment gains in the coming years.
In today’s Smart Money, I’ll show you a few under-the-radar AI Appliers on my list with near-future upside potential. That said, with the markets in distress this week, I suggest putting them on your watch list for consideration after this current bout of volatility calms. After all, the AI Revolution isn’t going anywhere.
Then, I’ll explain how investing in these companies is crucial for positioning yourself in this ever-evolving landscape…
The AI Appliers
Global X Uranium ETF (URA)
The data centers that power AI technologies require such prodigious – and reliable – volumes of electricity that tech giants like Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and Microsoft Corp. (MSFT) have “rediscovered” nuclear power as an ideal energy source.
In October 2024, Amazon announced that Amazon Web Services (AWS) – its cloud computing platform – is set to invest more than $500 million in nuclear power.
AWS has signed an agreement with Dominion Energy Inc. (D), Virginia’s top utility company, to explore the development of a small modular reactor near Dominion’s North Anna Nuclear Generating Station (located about halfway between Washington and Richmond).
Around the same time, Google announced it will purchase power from Kairos Power, a small modular reactors developer. And in September, Microsoft made a deal with Constellation Energy Corp. (CEG) to restart a reactor at the infamous Three Mile Island nuclear facility near Harrisburg, Pennsylvania.
This unlikely marriage between Big Tech and nuclear power is the newest reason why the young bull market in uranium may last several more years.
To capitalize on that potential, I recommend putting the Global X Uranium ETF (URA) on your watchlist. This $3.3 billion ETF holds a broad portfolio of uranium companies – both those that are currently producing, and those that hope to begin producing in the future.
Coupang Inc. (CPNG)
Coupangmay not be a household name here in the United States, but the company is well known in every South Korean household. Coupang is South Korea’s go-to provider of Amazon-like services.
And they are investigating and testing ways to enhance its businesses with AI technologies.
As the company’s founder, Bom Suk Kim, explained on the company’s first quarter 2024 earnings call…
Machine-learning and AI continues to be – have been a core part of our strategy. We’ve deployed them in many facets of our business from supply chain management to same-day logistics.
We’re also seeing tremendous potential with large language models in a number of areas from search and ads to catalogue and operations among others. There is exciting potential for AI that we see and we see opportunities for it to contribute even more significantly to our business. But like any investment we make, we’ll test and iterate and then invest further only in the cases where we see the greatest potential for return.
Kim’s focus on AI and other cutting-edge technologies is not new. Coupang’s e-commerce platform already utilizes AI and advanced robotics. The company’s other patent-protected AI-related tech can predict future order volumes, alert product managers when prices fluctuate significantly, optimize Coupang Eats delivery, and enhance search accuracy.
Today, Coupang has more than 2,100 global patent registrations, and it serves customers in 190+ countries and territories.
As Coupang expands its empire, and its earnings continue ramping higher, I expect its share price to post solid market-beating gains for many years.
GE HealthCare Technologies Inc. (GEHC)
Despite being one of the oldest “new” healthcare stocks in the market, GE HealthCare is also leader in the field of AI-enabled medical devices. As of May 2024, of the more than 850 AI-enabled devices authorized by the U.S. Food and Drug Administration, 72 are from GE HealthCare.
From an investment perspective, GE HealthCare is a two-part story. It is a solid, steadily growing medical imaging company that also includes considerable fast-growth potential from its AI product line and investments.
According to Grand View Research, artificial intelligence will become a key driver of medical device innovation over the coming decade. The research firm predicts the AI component of the healthcare market will skyrocket from $15.4 billion in annual sales in 2023 to more than $200 billion in 2030. That’s a compound annual growth rate of 37.5%.
Importantly, GEHC’s AI solutions do not replace medical professionals; they assist them. The company’s AI-enabled devices and services operate alongside traditional medical practitioners to support and optimize their efforts.
GE HealthCare is embracing this new paradigm with gusto.
Arming Your Portfolio
While AI Appliers are sure to give your portfolio strength, a good portfolio has a mix of companies that fall into the three AI categories I’ve laid out before:
- AI Creators: Companies like Nvidia that develop the foundational hardware and software powering the AI Revolution.
- AI Appliers: Companies that either implement AI technologies to transform their business or provide the essential resources that power AI.
- AI Survivors: Traditional sectors like agriculture and metals that are difficult for AI to disrupt.
This dynamic landscape is transforming rapidly, and strategically it is crucial to invest across these categories in order to not get left behind.
As we’re seeing right now, even dominant companies like Nvidia can see their shares struggle despite beating earnings estimates, proving that no one AI play is immune to volatility.
We have all our AI bases covered at Fry’s Investment Report. Our portfolio includes holdings across several sectors – from tech innovators to energy powerhouses, and healthcare companies to metals and mining operations.
So, no matter which way the market turns, our balanced approach has us prepared.
Regards,
Eric Fry
