The Best Ways to Play the Artificial Intelligence “Gold Rush”

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Editor’s Note: Yesterday, Contributing Analyst Jody Chudley wrote about how the biggest tech companies (the “FAANG” stocks or the “Magnificent Seven”) have already experienced their fastest growth.

And today, Shah Gilani, the new Chief Investment Strategist at Manward Press, is hammering that point home. Be sure to read below to get his favorite artificial intelligence (AI) pick-and-shovel play right now.

But more importantly… Shah has compiled a list of several emerging AI companies with even more growth potential. They’re all trading for around $5, and in a recent video, he revealed all the details on why these stocks will be the biggest winners in the $15.7 trillion AI revolution.

Check out that video here.

– Rachel Gearhart, Publisher

Unless you’ve been living under a rock, you’ve at least heard about generative AI products such as ChatGPT.

These programs have a lot of uses. They can serve as brainstorming partners or catalysts for the discussion of new ideas… generate first drafts for writing projects… process and summarize documents… repurpose content so it can be used for different audiences… accelerate your learning in areas you’re not familiar with… guide business processes… accelerate coding… and develop conversational support bots… to name just a few.

Looking at those examples, you can see that the uses of generative AI are far wider – and much more beneficial – than just having ChatGPT finish a school paper or write your friends funny emails in the voice of a famous author.

To give you an idea of how widespread AI already is and how much room it still has to expand, consider that while 9 out of 10 leading businesses are already invested in AI technologies, only 14.6% have deployed AI capabilities in their operations.

That means there is still enormous potential for growth and widespread adoption – and that’s creating a huge opportunity.

But here’s the problem…

Nearly every company in the S&P 500 is talking about AI.

And not all of them will hit the bull’s-eye.

There are specific plays that will pay off… if you know where to look.

Gold Rush

I like to think of AI as being similar to the California gold rush. Most prospectors never struck it rich, but they did spend a lot of money on tools, supplies and clothing – and that generated huge profits for companies like Levi Strauss.

So what are the pick-and-shovel companies of AI?

Your first guess would likely be the semiconductor chip manufacturers that provide the processing power for generating results. You can’t have AI without them. I’m talking about names like Nvidia (Nasdaq: NVDA), Advanced Micro Devices (Nasdaq: AMD) and Intel (Nasdaq: INTC).

But there’s an even better AI pick-and-shovel play…

Semiconductor chips are of no use on their own until they are deployed in a machine that can put them to work.

The most basic “tools” of the whole AI revolution are the large-scale data centers that are the physical epicenters of the AI ecosystem.

Purpose-built AI data centers are facilities composed of networked computers, computing infrastructure and storage systems that leverage AI chips. They can run multiple computations at once as AI applications sift through enormous stores of data.

These AI-specific data centers require massive investments in terms of capital and time. So the companies that have already begun transitioning their infrastructure to meet the demands of AI have a huge first-mover advantage over their competitors – and a large moat.

Spending in the global AI infrastructure market (which includes data centers) is expected to reach $422.55 billion by 2029 to meet the growing demand. That equates to a compound annual growth rate of 44% over the next six years, according to research firm Data Bridge Market Research.

Very nice.

My favorite way to play data centers is Equinix (Nasdaq: EQIX), one of the largest data center operators in the world. It has 251 data centers… across 70 metro areas… in 32 countries… on six continents.

Its portfolio of data center assets includes…

  • Network dense: 2,000-plus networks, 100% of Tier 1 network routes
  • Cloud dense: 3,000-plus cloud and IT service providers
  • Interconnected ecosystems: 460,000-plus total interconnections.

That’s an impressive portfolio… and it’s boosting the company’s financials.

Going back to 2000, the company has increased its annual revenue every single year. It went from just $13.02 million in 2000 to $7.26 billion in 2022. And over the past 12 months, revenue has increased once again, coming in at $7.95 billion.

Most recently, the company reported third quarter results that included revenue of $2.06 billion, of which $1.96 billion was reoccurring revenue.

On the bottom line, net income for the third quarter was $276 million, which represented a year-over-year increase of 30%.

And here’s the best part…

Not only is Equinix tied to one of the fastest-growing industries in the world and generating consistently increasing revenue… but it has also posted eight years of cash dividend growth since becoming a real estate investment trust (REIT) in 2015.

Speaking of the dividend, the company recently increased its fourth quarter dividend to $4.26 per share, a 25% increase from the third quarter.

On an annual basis, the company will pay out $14.49 per share in 2023, a 19% year-over-year increase.

I like Equinix’s prospects as a solid AI pick-and-shovel play with plenty of growth and income ahead of it… but I’ve got my eye on some smaller plays with huge potential.

I’ve just released details on three tiny AI companies that I think will CRUSH Nvidia, Microsoft (Nasdaq: MSFT) and Alphabet (Nasdaq: GOOGL)… with up to 2,100% in upside targeted in the next three years.

Go here for all the details.

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