![]() Separately, critical energy infrastructure woes have reached the point where trillions need to be spent to rebalance, upgrade and reorient many countries’ energy systems, from generation to transmission to distribution. With TSMC valued at a lower price-to-earnings ratio than the typical global stock, and Micron and Samsung trading at about 1.5 times book value, chip manufacturers provide a way to participate in the exciting growth of AI while remaining disciplined about valuation. While it is very unclear whether many of those screaming about their AI angle will ever produce profits or even revenues from it, they will need to buy a boatload of advanced processors that are surrounded by massive amounts of very fast and high-margin memory chips. ![]() ![]() They are the weapons and ammo suppliers to all those striving to win in AI. However, Taiwan Semiconductor Manufacturing Company (TSMC), Micron Technology and Samsung Electronics are big beneficiaries of the competitive frenzy that’s just started. We will need to cross a chasm from hype to actual results before the real opportunities emerge.ĪI is already providing a very nice new demand growth wedge for some of our Advantaged Industrials. It now trades for more than 20 times sales – likely to grow rapidly, but then Cisco (the Nvidia of its time) grew rapidly after 2000, too, and that didn’t make it a rewarding investment. Though hardly an underfollowed name, Nvidia now expects revenue for this quarter to be some 55% higher than market analysts estimated just a few months ago. (We’ll use “AI” conventionally as “artificial intelligence” from here on.) A recent guest on CNBC openly admitted that they know AI is a bubble, but they’re buying because they’ve learned from the past 10 years that the bubble can keep going. But today it looks way too hyped and crowded, with profit paths too uncertain. The other “AI”, artificial intelligence, will also have a big long-term impact. We’re speaking, of course, about Advantaged Industrials, which we believe present a fantastic investment opportunity. Yet, they still sell for very attractive, we might even say neglected, valuations. They are solving some of the world’s most important and intractable problems. Many of them have a sustainable edge over their competitors. AI businesses have locked in big sources of long-term demand growth. ![]()
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