Any AI Stocks to Look Into After NVDA's Pump?

Tech companies are jumping into the AI space as the disruptive technology proves to be popular with investors, though some warn it could be just a fad

Too Late to Jump In?

Nvidia's meteoric rise (+167%) so far this year, thanks to AI, has caught the interest of investors. But does it mean the upside has run out after such a substantial rise? Or are other companies in the space that have yet to experience a similar boost to the stock price? Following Nvidia's stellar results last week, several companies also saw substantial gains on the hope of gains related to AI, such as Microsoft (+3.9%) - the owner of ChatGPT, which started the AI interest -, its rival Alphabet (+2.1%), as well as other manufacturers supporting AI, such as AMD (+11%) and Micron (+4.6%).

The sudden interest in the latest technology is reminiscent of the blockchain drives from 2017, where companies saw triple-digit gains by simply changing their name to reference blockchain. The number of companies discussing AI on conference calls last quarter has shot up to a new record. If AI is a new bubble, it's still in its infancy, according to Bank of America research, comparing past bubbles that have similarly captured market attention. What companies could benefit in line with Nvidia?

The Two Routes

Nvidia is not itself an AI technology firm; it produces the servers and processors needed for AI to operate. In a similar vein of thinking, taking a look at companies that could stand to gain by supporting AI expansion, Taiwan Semiconductor is the world's largest manufacturer of semiconductor chips - and is a supplier to Nvidia, with its chips being integral to the GPUs that process AI. Recently, Warren Buffet divested his interest in Taiwan Semi over geopolitical concerns, with China taking a more expansionist view of Taiwan. But the company's fundamentals were enough to make it interesting in the first place.

A different direction would be to take a step forward in the supply chain: Nvidia's growth is because of the large amount of processing power and data storage needed for AI. At the moment, the largest supplier of data storage is Amazon's AWS, which accounts for more of the company's profits than its flagship stores. Additionally, Amazon has been keen to bring in AI to reduce processing costs and overhead, which could provide a double benefit for AI adoption in the company.

Amazon in Rising Wedge?

Amazon's share prices resemble a rising wedge pattern which, if completed, could lead the stock to a short-term correction but propel it towards $147 in the medium term. Breaking past last August's high might expose $160 and the peak of $189. Contrary, and regardless of the short-term projection towards double digits, losing the $100 handle will increase the chances of further declines, opening the door to $81.50 should the swing of $90 succumb to potential pressure.

Key Takeaways

AI has caught the interest of investors with Nvidia's impressive rise of 167% this year. Other companies, including Microsoft, Alphabet, AMD, and Micron, have seen substantial gains. However, some warn that the sudden interest could be a bubble similar to the blockchain craze in 2017. There are two routes to getting into AI: supporting its expansion by investing in semiconductor chips from companies like Taiwan Semiconductor, which supplies Nvidia, or investing in data storage providers like Amazon AWS, which is the largest supplier of data storage and is keen on using AI to reduce processing costs.