This article will discuss the industries and manufacturers that have benefited significantly from the trend of generative artificial intelligence (AI) in the past year and a half in the short term.
Semiconductor chip design industry
Not all semiconductor companies can benefit, but in the past year and a half, due to the trend of generative artificial intelligence, in the short term, the industry that has clearly benefited from this trend is the chip design of the semiconductor industry. , no one dares to say it is the first. It is self-evident to look at the growth of Nvidia stock and the Philadelphia Semiconductor Index over the past year and a half.
Since I have written many articles on this aspect in this blog, interested readers may start with the following posts:
- “Semiconductor replaced software and become investors’ darling“
- “Four chip companies account for one-third of S&P 500 gains so far this year“
- “Top five lucrative artificial lucrative intelligence listed companies“
- “Data center, a rapidly growing semiconductor field“
- “How does the all-powerful Huawei make money?“
- “How does nVidia make money, Nvidia is changing the gaming rules“
- “The reasons for Nvidia’s monopoly and the challenges it faces“
- “Revisiting Nvidia: The Absolute Leader in Artificial Intelligence, Data Center, and Graphics“
- “How AMD makes money? A rare case of turning defeat into victory“
- “Why is AMD’s performance so jaw-dropping?“
- “Significant changes in Broadcom’s business approach“
Semiconductor equipment and materials
These semiconductor equipment suppliers mainly include top equipment manufacturers in the chip industry chain such as ASML, Applied Materials, Colin, Kelei, Tokyo Electron and BE Semiconductor; plus semiconductor raw material manufacturers mainly controlled by the Japanese.
See my previous post of:
- “How does Applied Materials, lord of semiconductor equipment, make money?“
- “ASML, who dominate TSMC’s fate“
- “How does Lam Research, top chip equipment player, make money?“
- “The lucrative semiconductor supply chain“
- “Global semiconductor chip market in detail, big dominators and markets“
- “6 common wrong semiconductor investment myths“
Chip foundry
Since this wave of artificial intelligence semiconductors requires advanced manufacturing processes, to put it bluntly, the main beneficiary in this field is TSMC. The following are my blog posts about this company:
- “What’s TSMC DCF intrinsic value?How to calculate it quickly with a free tool?“
- “DCF (Discounted Cash Flow) Calculator“
- “Valuation methods significant different between US and Taiwan investors“
- “For Taiwanese stock investors investing in US stocks“
- “Is Buffett no longer hold for long haul? TSMC, HP, and US Bancorp cases study“
- “TSMC negative corp culture and management style are detrimental to its future and growth“
- “Four chip companies account for one-third of S&P 500 gains so far this year
- “Top five lucrative artificial lucrative intelligence listed companies“
- “What’s TSMC DCF intrinsic value?How to calculate it quickly with a free tool?“
- “How many fabs and houses does TSMC have currently and in the future?“
- “Comparison of TSMC, Samsung, Intel’s Yield and Advanced Process“
- “The TSMC cost, sell price, and R&D cost of chip foundry“
- “Comparison of SMIC, Rapidus, TSMC, Intel, and Samsung’s new process roadmaps for future chips“
- “Two long-term threats to TSMC: US and SMIC“
- “Why is TSMC’s profit margin much greater than competitors?“
- “How does TSMC make money?“
- “Zyvex and sub-nanometer semiconductor processes, will Zyvex threat TSMC?“
- “TSMC gets emerging and serious challenges“
Infrastructure related
This category includes many different types of industries, such as the following clearly profitable industries:
- Cloud computing service providers
- Data Centers and Real Estate Investment Trusts (REITs)
- Data center hardware and equipment companies
Readers who are interested in this aspect can refer to the following related articles of mine:
- “Why Fastly shutdown thousands websites but its stock soaring 11%?“
- “Cloudflare, a rising star in cloud computing infrastructure“
- “Microsoft, the dominant overlord of cloud computing“
Software security stocks
Due to the trend of data centers, software, artificial intelligence, and cloud computing, the demand for software security has also been triggered. Readers who are interested in this aspect can refer to the following related articles of mine:
- “How Palo Alto Networks, a rare long-term continuous and stable growth security giant, makes money?“
- “How perform well and high growing CrowdStrike makes money?“
- “Cloudflare, a rising star in cloud computing infrastructure“
Software industry
The software industry has successfully used artificial intelligence, and to be honest, there are not many manufacturers that can make a lot of money. Since I have written many articles on this aspect in this blog, interested readers may start with the following posts:
- “Why software underperforming amid the AI craze?“
- “Semiconductor replaced software and become investors’ darling“
- “Major artificial intelligence companies in US stocks market“
- “OpenAI, the Generative Artificial Intelligence rising star and ChatGPT“
- “Consider Alphabet if you can buy one stock only to retire from it? “
- “How Microsoft makes money? What’s the next?“
- “How Adobe makes money? irreplaceable undocumented standard“
- “Artificial intelligence online lending platform Upstart“
- “Deep Dive The Trade Desk“
- “C3.ai, a position successfully artificial intelligence company“
- “What kind of company is Palantir?“
- “Fair Isaac, one of the most important listed companies in the US consumer finance industry“
- “Intuit, the leader in financial management software for individuals and SME“
- “Three EDA oligopoly vendors: Synopsys, Cadence, and Siemens’s Mentor Graphics“
- “How does, the EDA oligopoly, Cadence make money?“
- “How does Synopsis, the EDA oligopoly, make money?“
Server industry
The server industry is a direct downstream industry of the semiconductor industry that has benefited significantly from the trend of generative artificial intelligence in the short term. Many manufacturers in the server industry have also benefited from this. To put it more clearly: Basically, as long as they sell large servers, especially those that supply them to data centers, there are few companies that do not make a lot of money.
Interested readers can start with my following posts:
- “Data center, a rapidly growing semiconductor field“
- “Supermicro, a repeat offender of scandals, valuation is not justified and unsustanable, no worth for long-term holding“
- “How does HP make money? The pros and cons of investing in HP“
- “How does IBM make money? What’s next?“
Heat dissipation (aka thermo)
As the computing power of GPU chips increases, the heat energy generated also increases. The traditional air cooling used in the electronics industry for many years can no longer cope with it, and new cooling solutions must be used.
Among them, Vertiv (ticker: VRT) is a typical example. For details, see my other post: “How Vertiv, share price return 2.5 times of Nvidia, make money?“
Water
Citing data from Bluefield Research, J.P. Morgan pointed out in a research report that total water consumption in global data centers (including on-site cooling and off-site power generation) will grow by 6% annually from 2017 to 2022. R&D says water use could jump to 450 million gallons per day by 2030. This is equivalent to approximately 681 Olympic-sized swimming pools of fresh water being needed every day to cool data centers around the world.
American Water Works (ticker: AWK) is a typical example, for detail of this company, please see my post of “How does American Water Works make money?“
Electricity
Electricity use rise sharply due to AI
A Bank of America report states that the power consumption of GPUs is 2 to 2.5 times that of CPUs. As data centers are successively constructed, power consumption is expected to increase significantly and will be 50% higher than the power consumption of existing data centers in the United States. Based on the above, it is estimated that the compound annual growth rate of electricity demand in the artificial intelligence industry will reach 25% to 33% in the next few years.
The Goldman Sachs report also recommends that investors should pay attention to utility stocks that indirectly benefit from the trend of artificial intelligence. The bank expects that from 2023 to 2030, the compound annual growth rate of U.S. data center electricity demand will reach 15%, and the proportion of data center electricity consumption in U.S. electricity demand will also increase from the current 3% in 2030. Annual expansion to 8%.
Citi analysts said that by 2030, data center electricity demand may account for 10.9% of overall U.S. electricity demand, much higher than the current 4.5%.
No matter which company’s analysis, the results are very consistent. Data centers established due to artificial intelligence will consume significantly more electricity.
In early July 2024, according to statistics from Reuters Thompson, U.S. nuclear power plant operators Constellation Energy (ticker: CEG) and Vistra have become the strongest stocks in the S&P 500 Index after Supermicro and Nvidia. share.
Among them, Vistra (ticker: VST) is a typical example. For details, see my other post: “Why did US largest electricity Vistra, a turned around comapny, share return higher than Nvidia?“
Electricity share price performance
The uptrend in U.S. electric power companies this year, in addition to a rebound that had been bleak all year long last year, also reflects the market’s growing belief that the U.S. economy can still have momentum despite high interest rates, and the boom in artificial intelligence. can come true.
The economy is not deteriorating, power demand is expected to be stable, and artificial intelligence data centers will rely on power companies to provide a lot of power. These factors make power companies a popular bet.
The latest wave of gains began earlier this year, starting with independent power producers that sell electricity to wholesale markets and later spreading to regulated utilities.
Dow Jones Newswires pointed out that in the past three months, utility stocks in the S&P 500 Index, which usually perform tepidly, jumped more than 18%, while information technology stocks only ranked second with a gain of 11%. Three of the five best-performing companies in the S&P 500 so far this year are power producers.
Energy
The demand for electricity requires the supply of energy.
Data center power demand surges
Since artificial intelligence servers in data centers are super power-hungry monsters, the surge in power demand in data centers has undoubtedly brought challenges to large technology companies. Large artificial intelligence companies have committed to powering their data centers with renewable energy to reduce carbon emissions.
Green energy cannot satisfy
However, solar and wind power alone, two weather-dependent sources of energy, may not be enough to meet the companies’ electricity loads, according to a report by consultancy Rystad Energy. According to Rystad, surging electricity loads will require a source of energy to fill the gap and meet surge demand in the absence of insufficient renewable energy generation.
Natural gas is preferred
The industry believes natural gas will be the first choice. Natural gas will play a more critical role in the future. Although natural gas power generation is much more expensive, because it causes little environmental pollution, it is more in line with the commitment of large enterprises to reduce carbon emissions.
Kinder Morgan (ticker: KMI), the largest natural gas pipeline operator in the United States, said, “Demand trends show that emphasizing renewable energy as the only source of electricity is fatally flawed in terms of meeting the actual needs of the market. I believe them (Big tech companies) are starting to realize the role that natural gas and nuclear energy have to play.”
A report released by Goldman Sachs in April this year showed that in order to meet the growth in power demand brought about by artificial intelligence and data centers, natural gas is expected to account for 60% of the increase, while renewable energy will account for the remaining 40%.
According to Wells Fargo, natural gas demand could increase by 10 billion cubic feet per day by 2030. This would be a 28% increase from the current U.S. electricity consumption of 35 billion cubic feet per day and account for 10% of total U.S. daily natural gas consumption of 100 billion cubic feet. “That’s why people are becoming more bullish on natural gas. That’s a pretty high growth rate for a commodity.”
Example
The demand for electricity in data centers is expected to increase, causing utility stocks to become the big winners in the AI theme this year. For example, the stock prices of Constellation Energy (ticker: CEG) and New Century Energy (ticker: NEE) have soared this year. rose 90.4% and 26.7%.
Regarding New Century Energy, please see the introduction to my previous post:
Copper
Winners also included copper prices and copper mining stocks, which have been buoyed this year.
Copper prices rise sharply
New York copper prices jumped to a record high on May 21, breaking through the price of US$5 per pound, and have increased by more than 30% since 2024. Increasing hopes for a “soft landing” for the economy, the possibility that the U.S. dollar will depreciate once the Federal Reserve cuts interest rates, and signs that mainland China’s economy is rebounding, are pushing up copper prices.
Copper is a widely used industrial metal due to its good conductivity. It is an indispensable basic raw material for energy, power generation, lines, wires, cables, semiconductors, and infrastructure. Copper demand is closely related to economic growth, so copper prices are often seen as a bellwether for the economic outlook.
Copper mining stocks bullish
Copper mining stocks are another big beneficiary, and the share prices of some market leaders have also risen sharply in 2024.
BofA Securities pointed out that in addition to wires and cables, demand for brass has also increased in two other “new uses”: renewable energy and electric vehicles. A research report published by Bank of America Securities this week said: “We believe that ‘decarbonization means increasing metal density.’ Replacing hydrocarbons usually refers to electrification, and electrification is equated with copper.”
Copper demand continues to rise, whether for wind turbines, solar panels, electric vehicles, nuclear power plants, grid upgrades, battery production, or power-hungry AI data centers. Copper prices are rising, but supply growth is slow, which will cause the copper market to be in short supply in the next few years.
Example
Large-cap stocks such as Britain’s Antofagasta (ticker: ANFGF), which is experiencing strong growth in copper production, blue-chip Freeport-McMoRan (ticker: FCY), which is investing in copper, and growth stock Teck Resources (ticker: TECK), which is selling off coal assets and switching to copper. The gains of these three stocks this year are: 39.8%, 27.6% and 26.3%.
Data providers
Why is data important?
This is the most complex, most difficult to categorize, and the most scattered beneficiary industry, but it is the core component and its importance cannot be underestimated. Because I mentioned in my previous post “Artificial intelligence investment trap” that data are the three major components of artificial intelligence. Without original data, artificial intelligence training cannot be carried out. Without training, it is impossible to make inferences. Without the ability to make inferences, The system is basically not an artificial intelligence system.
Intellectual property rights
The legal disputes ChatGPT has encountered from 2023 to this year can be roughly divided into three categories, namely copyright infringement, personal privacy infringement, rumors or spreading false information. The Writers Guild of America complained that after these authors’ works were downloaded from pirated e-book libraries, they were copied into ChatGPT, allowing OpenAI to make billions of dollars in profit.
In order to reassure customers, both Adobe and Microsoft have publicly announced that if customers encounter copyright disputes using data generated by artificial intelligence on their platforms, such as images, they will provide full compensation for related legal fees.
American actress Scarlett Johansson, who once played the Marvel superhero “Black Widow”, denounced OpenAI for setting a voice for the chatbot ChatGPT that was “exactly the same” as hers without her permission. OpenAI said it would suspend use of the voice, called Sky.
Scarlett Johansson said that Ultraman wanted to hire her to voice the ChatGPT system last year, but she declined. Her lawyers are asking Ultraman and OpenAI to provide more details about how they created Sky.
Product integration
Some typical examples include: Baidu will become the supplier of generative artificial intelligence built into Apple’s latest iOS and macOS. Apple has reached an agreement with OpenAI to introduce ChatGPT into Siri in iOS 18 and increase iPhone memory to support new artificial intelligence edge computing. Apple is rumored to be in talks with Google, a subsidiary of Alphabet, and may agree to use Gemini to drive some of the iPhone’s artificial intelligence functions. It is also discussing with OpenAI to consider using its artificial intelligence model.
Social Network
In May 2024, Reddit announced a partnership with OpenAI, driving its stock price up 11% to a record high. The deal will allow ChatGPT to train its artificial intelligence models based on Reddit content. OpenAI has previously announced a similar agreement with Alphabet-owned Google.
In August 2023, Google and Universal Music (ticker: VIVHY) were in talks to license artists to use artificial intelligence-generated melodies and sounds for songs as the music business attempts to monetize one of its biggest threats.
News providers
In May 2024, Alphabet’s Google plans to pay News Corp., owner of the Wall Street Journal, about $5 to $6 million annually to create artificial intelligence-related content and products.
News Corp has also signed an agreement with OpenAI to share content and news expertise. News Corporation (ticker: NWSA) has authorized OpenAI to use its content with a five-year contract worth US$250 million. In addition to the Wall Street Journal, News Corp’s brands also include the New York Post, Dow Jones subsidiary MarketWatch, the UK’s Daily Telegraph, and Australia’s national mainstream Media “The Australian” (The Australian), etc.
On New Year’s Eve in 2024, OpenAI and Microsoft, which created ChatGPT, were sued by the New York Times, accusing the two companies of using millions of New York Times articles to train ChatGPT and Microsoft Copilot without authorization. Chatbot.
Creators
In April 2024, Apple signed a $50 million agreement with Shutterstock to train artificial intelligence on millions of stock images. Adobe also pays $3 per minute for the resources of video creators to build its artificial intelligence models. Meta is weighing striking deals with news publishers for access to AI training data, sources say.
Hollywood
Alphabet, Google’s parent company. and Meta have held discussions with major Hollywood studios, hoping that the studios can license IP content for use in the two technology giants’ artificial intelligence video generation software. Both companies are developing technology that can create realistic scenes based on text prompts and have provided tens of millions of dollars in funding to work with film companies.
In addition, Microsoft-backed competitor OpenAI is also having similar conversations. Warner Bros. Discovery (ticker: WBD ) has said it is willing to license some of its content to train models, but only to specific departments, not all. Walt Disney and Netflix have been reluctant to license their content to the technology companies, but have shown interest in other types of collaborations.
Music
Sony Music sent a letter to 700 artificial intelligence-related manufacturers around the world, warning them not to use music owned by Sony for training without authorization; stating, “Do not use our content to train your artificial intelligence.”
Related articles
- “Geoffrey Hinton, 2024 Nobel Physics winner, inadvertently helped Nvida transform to AI overlord“
- “2024 Nobel Chemistry Prize awarded to 3 AI experts, accurately predict the 3D structure of proteins“
- “Artificial intelligence benefits industries“
- “How Much Does Generative AI Cost?“
- “AI PC is changing the PC supply chain and ecosystem“
- “Why software underperforming amid the AI craze?“
- “Semiconductor replaced software and become investors’ darling“
- “The Importance of Small Language Models (SLM) in AI, how is Apple AI different from others?“
- “How Vertiv, share price return 2.5 times of Nvidia, make money?“
- “Why did US largest electricity Vistra, a turned around comapny, share return higher than Nvidia?“
- “How does American Water Works make money?“
- “Excluding top tech behemoths, US market grew almost zero in 2023“
- “Four chip companies account for one-third of S&P 500 gains so far this year“
- “Top five lucrative artificial lucrative intelligence listed companies“
- “Supermicro, a repeat offender of scandals, valuation is not justified and unsustanable, no worth for long-term holding“
- “The artificial intelligence bubble in the capital market is forming“
- “How does the all-powerful Huawei make money?“
- “Artificial intelligence investment trap“
- “Major artificial intelligence companies in US stocks market“
- “OpenAI, the Generative Artificial Intelligence rising star and ChatGPT“
- “Consider Alphabet if you can buy one stock only to retire from it? “
- “How Microsoft makes money? What’s the next?“
- “How Adobe makes money? irreplaceable undocumented standard“
- “Artificial intelligence online lending platform Upstart“
- “Deep Dive The Trade Desk“
- “C3.ai, a position successfully artificial intelligence company“
- “What kind of company is Palantir?“
- “Fair Isaac, one of the most important listed companies in the US consumer finance industry“
- “Intuit, the leader in financial management software for individuals and SMEs”
- “How does Tesla make money?“
- “What’s TSMC DCF intrinsic value?How to calculate it quickly with a free tool?“
- “TSMC negative corp culture and management style are detrimental to its future and growth“
- “Four chip companies account for one-third of S&P 500 gains so far this year
- “Top five lucrative artificial lucrative intelligence listed companies“
- “What’s TSMC DCF intrinsic value?How to calculate it quickly with a free tool?“
- “How many fabs and houses does TSMC have currently and in the future?“
- “Comparison of TSMC, Samsung, Intel’s Yield and Advanced Process“
- “The TSMC cost, sell price, and R&D cost of chip foundry“
- “ASML, who dominate TSMC’s fate“
- “Comparison of SMIC, Rapidus, TSMC, Intel, and Samsung’s new process roadmaps for future chips“
- “Two long-term threats to TSMC: US and SMIC“
- “Why is TSMC’s profit margin much greater than competitors?“
- “How does TSMC make money?“
- “Zyvex and sub-nanometer semiconductor processes, will Zyvex threat TSMC?“
- “TSMC gets emerging and serious challenges“
- “How does nVidia make money, Nvidia is changing the gaming rules“
- “The reasons for Nvidia’s monopoly and the challenges it faces“
- “Why nVidia failed to acquire ARM?“
- “Revisiting Nvidia: The Absolute Leader in Artificial Intelligence, Data Center, and Graphics“
- “How does Intel make money? and the benefits to invest in it“
- “Intel’s current difficult dilemma“
- “How does Micron make money? What investors should know?“
- “How does Texas Instruments make money? Amazing long term capital reward and company net profit margin!“
- “How AMD makes money? A rare case of turning defeat into victory“
- “Why is AMD’s performance so jaw-dropping?“
- “Qualcomm diversifies success, no nonger highly dependend on phone“
- “How does the ubiquitous Arm make money?“
- “Significant changes in Broadcom’s business approach“
- “Data center, a rapidly growing semiconductor field“
- “How does Applied Materials, lord of semiconductor equipment, make money?“
- “How does Lam Research, top chip equipment player, make money?“
- “The lucrative semiconductor supply chain“
- “Global semiconductor chip market in detail, big dominators and markets“
- “6 common wrong semiconductor investment myths“
- “Three EDA oligopoly vendors: Synopsys, Cadence, and Siemens’s Mentor Graphics“
- “How does, the EDA oligopoly, Cadence make money?“
- “How does Synopsis, the EDA oligopoly, make money?“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
