Why BigBear.ai, Supermicrocomputer, Arm Holdings and other artificial intelligence (AI) stocks soared on Tuesday

Investing in the latest developments in artificial intelligence (AI) has been a huge deal over the past few years. But over the past few weeks, investors have been feeling sinking as many stocks in the sector have lost altitude. The combination of rapid stock gains and uncertainty heading into earnings season has led to a decline, but many believe the decline will be temporary. Market watchers have been looking for signs that downward pressure may be easing and may have found a reason to be optimistic today.

Against this backdrop, data mining and analytics providers Big Bear.ai (BBAI 10.06%) 9.3% surge, AI server specialist company super micro computer (SMCI 4.65%) 6.3% surge, chip maker Arm Holdings (eight 3.15%) Up 3%, AI solution provider C3.ai (AI 3.29%) It rose 3.3%, micron technology (M.U. 3.21%) It was up 2.9% as of 12:56 PM ET on Tuesday.

We checked all the usual suspects – regulatory filings, financial reports, analyst price target changes – and nothing got in the way of reporting company-specific news. any Among these AI stocks are higher. This suggests that many investors have focused on the development of the chipmaker, which is one of the biggest names in AI. nvidia (NVDA 3.03%).

Image source: Getty Images.

A sign of continued demand

Vietnam’s leading technology company FPT has announced a comprehensive strategic partnership with NVIDIA, according to a press release issued Tuesday morning. The goal of the collaboration is to provide customers with a “one-stop shop for AI and cloud” and will include “AI products, (graphics processing units) infrastructure, technology experts and domain expertise” for customers in Vietnam and around the world. . region.

Central to the plan is a $200 million investment to build an AI factory and cloud facility equipped with Nvidia’s latest AI technologies, including H100 Tensor Core GPUs, enterprise software and frameworks. FPT plans to provide “end-to-end generative AI services” by prioritizing three key industry sectors: automotive, manufacturing, banking, financial services, and insurance.

This may seem like a small advance in the grand scheme of things, but it provides evidence that demand for AI continues to proliferate. Additionally, as FPT’s customers begin to adopt AI, it will open up additional opportunities for Nvidia to sell its products and services.

Nvidia announced plans to expand its presence in Vietnam at the end of last year.

poor connection

This is undoubtedly good news for Nvidia, but what does this have to do with our five AI stocks? The widespread and continued adoption of AI is good news for all stocks in the sector. For some the benefits are more concrete, for others more modest.

• Super Micro Computer creates premium, energy-efficient, customizable, AI-enabled servers. Nvidia is one of the major suppliers of AI processors to Supermicro.
• Arm Holdings licenses some of the architecture and designs included in Nvidia’s advanced AI chips. The company earns royalties and licensing revenue from sales of Nvidia’s AI-based processors.
• Micron Technology provides memory and storage solutions that are also a core part of Nvidia’s standard AI chips. It directly benefits from the increased demand for processors.
• C3.ai provides turnkey AI solutions designed to help businesses adopt AI and get AI-based applications up and running quickly.
• BigBear.ai provides decision intelligence solutions that can experience increased demand depending on companies’ willingness to adopt AI.

It’s important to remember that not all companies in the AI ​​space are created equal. This factor will become more important over time as investors demand that AI deliver on its promise by generating revenue and profits. Of the five, BigBear.ai and C3.ai are currently unprofitable.

Then there is the question of valuation. While Arm Holdings is the most expensive of the three at 20x forward sales, Micron and Supermicro are currently selling at 3x and 2x forward sales, respectively.

For my money, Supermicro is the least risky of the stocks listed here. Not only does it have the most attractive valuation among profit-generating companies, but it has also generated blockbuster financial performance thanks to surging demand for AI. That said, while Arm Holdings and Micron Technology both present compelling opportunities, we believe C3.ai and BigBear.ai have yet to live up to their potential.