Bank of America Identifies 5 Global AI Stocks with Promising Potential
Bank of America has recently highlighted five global stocks that are poised to benefit from the expanding use cases of artificial intelligence (AI) applications. In a note titled "End-device AI: Great potential with hidden gems awaits," the bank emphasizes the potential for customized and private AI services to be directly integrated into users' end devices, such as smartphones, tablets, and cars. This shift towards "end-device AI" is distinct from current server-based systems that rely on cloud computing, offering new opportunities for growth and innovation.
The Growth Prospects of AI Computing Cores
Bank of America analysts predict significant growth for AI computing cores, estimating a compounded annual growth rate of 96% for foundries and a 105% growth rate for chipmakers from 2023 to 2025. This surge in demand is expected to generate over $14 billion in revenue. The bank's analysts, led by Brad Lin, believe that this trend will lead to a strong semiconductor upgrade for end-devices and ignite a substantial replacement cycle. They anticipate the launch of more generative AI-ready chips in late 2023, with new end-product announcements during CES and MWC in early 2024 serving as key catalysts.
Key Potential Beneficiaries in the Semiconductor Industry
The report identifies several semiconductor leaders as key potential beneficiaries of the growing AI application trend. Qualcomm, for example, is expected to provide advanced end-device AI capabilities through its Ride platform for in-car services. The company's collaboration with Meta to bring AI to smartphones and PCs using Meta's Llama 2 large language models directly on devices is also noted.
MediaTek, another semiconductor firm, is projected to incorporate generative AI functions into its next flagship smartphone chips. Bank of America anticipates that MediaTek will expand the size of its AI processors to accommodate these advanced capabilities.
Nordic Semiconductor is recognized for its acquisition of Altazo, which includes hyper-low-power AI/ML processor technology for future system-on-chips. This acquisition positions the company well for future growth in the AI market.
SK Hynix, a memory chipmaker, is already benefiting from over 10% of its sales coming from high-bandwidth memory used in AI. With the rising demand for customized AI services, Bank of America expects SK Hynix to experience further growth.
Renesas, a Japanese semiconductor giant, is favored by Bank of America for its development of specialized inference chips and its ambitious goal of capturing a larger share of the 200 billion yen ($1.34 billion) AI market by 2026.
In conclusion, Bank of America's identification of these global AI stocks underscores the significant growth potential in the AI industry. As the adoption of AI applications expands and end-device AI becomes more prevalent, these companies are well-positioned to benefit from the evolving landscape. Investors and industry observers will closely monitor the progress of these stocks as they navigate the promising opportunities presented by the growing AI market.
Implications of AI Stocks' Potential on New Business Formation
Bank of America's recent spotlight on five global stocks set to benefit from the growing use of artificial intelligence (AI) applications offers valuable insights for new businesses. The bank's focus on the potential of integrating customized and private AI services directly into end devices, such as smartphones, tablets, and cars, suggests a shift from current server-based systems reliant on cloud computing.
AI Computing Cores and Business Growth
The bank's analysts predict a significant growth for AI computing cores, estimating a compounded annual growth rate of 96% for foundries and a 105% growth rate for chipmakers from 2023 to 2025. For new businesses, this trend indicates a strong semiconductor upgrade for end-devices and a substantial replacement cycle, offering opportunities for growth and innovation.
Beneficiaries in the Semiconductor Industry
The report identifies several semiconductor leaders as potential beneficiaries of this trend, including Qualcomm, MediaTek, Nordic Semiconductor, SK Hynix, and Renesas. These companies' strategies, ranging from advanced end-device AI capabilities to the development of specialized inference chips, provide a roadmap for new businesses looking to enter or expand in the AI market.
In light of Bank of America's report, new businesses should consider the growing potential of AI applications and the shift towards end-device AI. The significant growth predicted for AI computing cores and the strategies of leading semiconductor companies offer valuable insights for new businesses. As the AI market continues to expand, new businesses have the opportunity to capitalize on these trends and position themselves for success.