Today witnessed another surge in shares for AI chip-related companies such as Broadcom, Marvell Technologies, and Arm Holdings.
AI stock warriors, take notice! Monday saw a rally in shares of AI chip developers like Broadcom, Marvell Technology, and Arm Holdings, despite a slight dip in the tail-end of the day. The reason for this bounce? Well, it seems that AI chip demand is still going strong, and we have our friends at Foxconn to thank for that.
Foxconn, or as it's also known, Hon Hai Precision, released some impressive revenue figures this Monday morning. The world's largest electronics assembler reported a whopping 42.3% year-over-year growth in December, their highest monthly figure of 2024. Guess what drove this growth? You guessed it – AI servers.
This isn't just a one-off occurrence. Microsoft also threw its hat in the ring, promising to invest upwards of $80 billion in AI data centers this fiscal year. That's quite the commitment, but it shows just how much faith these tech giants have in the future of AI.
So, what does this mean for our AI chip stocks? Well, for Broadcom and Marvell, it means further gains. Both companies make custom accelerator parts that the cloud computing giants incorporate into their AI accelerator designs. Seeing as all these companies are investing heavily in AI, it's no surprise to see their stocks doing well.
Nvidia, too, saw a surge thanks to the announcement. The availability of its new Blackwell chip may have contributed to Foxconn's growth, as it licenses its architecture to Nvidia and other cloud giants for their AI servers.
However, while these stocks may be riding a wave of optimism, it's important to remember that they're trading at quite hefty valuations. Broadcom is valued at 37 times this year's earnings estimates, Marvell at 44 times, and Arm at a staggering 71 times. That means any disappointment or slowdown in AI growth could lead to a significant drop in price.
But for the time being, the AI infrastructure buildout shows no signs of slowing down. So, if you're feeling bullish, these stocks might be worth a second look. Just remember to keep an eye on those valuations and invest with caution.
Given the rapid growth in AI servers, which significantly contributed to Foxconn's revenue surge, investors might consider delving into the finance world and considering further investments in AI chip stocks like Broadcom and Marvell. These companies provide custom accelerator parts used by cloud computing giants in their AI accelerator designs, making them strategically positioned in the AI sector's growth tide. However, it's crucial to approach such investments mindfully, considering the high valuations of these stocks, as any potential slowdown in AI growth could result in significant price drops.
