A trend that is quickly spreading with artificial intelligence (AI) stocks is the investor looking at them all through the same lens. For example, when a company in the AI space reports strong financial results, other stocks in the space get a lift as investors expect a rising tide to lift all boats.
Like the foundry, it still looks the same today. Taiwan Semiconductor Manufacturing (NYSE: TSM ) The semiconductor giant jumped 3.3 percent Intel (NASDAQ: INTC ) 2.3%, and the database specialist rallied. Oracle (NYSE: ORCL) It climbed 1.6% as of 12:45 pm ET on Thursday.
Checking all the usual suspects — regulatory filings, financial reports, and changes in analysts’ price targets — didn’t reveal much in the way of company-specific news driving results (more on that in a bit). . It turns out that investors were reacting to another financial outcome benefiting from the AI revolution, and they liked what they saw.
A rising tide lifts all boats.
Micron Technology (NASDAQ: MU ) released results for its fiscal 2024 second quarter (ended Feb. 29) on Wednesday, and investors were clearly impressed. The computer memory specialist generated revenue of $5.8 billion, up 23% year-over-year, resulting in adjusted earnings per share (EPS) of $0.42, up from a loss of $1.91 in the year-ago quarter. is better. Driving the results was increasing demand for high-bandwidth memory, which helped boost Micron’s profit margins.
The results beat Wall Street’s most bullish expectations, as analysts’ consensus estimates were calling for revenue of $5.35 billion and adjusted EPS of $0.24.
If the strong results weren’t enough to lift the stock, Micron’s forecast was eye-opening and put investors off guard. For the third quarter, management is guiding for revenue of $6.6 billion, which would represent year-over-year growth of 76%, driving adjusted EPS to $0.45 at both midpoints.
Management cited strong AI server demand in its DRAM memory and NAND flash-based storage development.
Investors clearly see these developments as positive for a broad cross-section of companies in the AI space.
A rising trend
While many AI stocks were climbing on Thursday, there was some company-related news for two of our three companies.
KeyBanc analyst Jackson Eder initiated coverage on Oracle, assigning an Overweight (Buy) rating and a $150 price target. This represents a potential upside for investors of 16% compared to Wednesday’s closing price. He cited Oracle’s recent results, saying he expects its cloud growth to exceed 50 percent in 2024 and 2025. He further believes that Oracle could create “a legitimate fourth” cloud infrastructure provider in the US, a space it currently dominates. Amazon Web Services (AWS), the alphabetGoogle Cloud of, and Microsoft Azure
Intel is likely still riding a wave of optimism from yesterday’s announcement that it was awarded $8.5 billion in direct funding under the CHIPS and SCIENCE Act to build leading chip factories in the US.
These developments suggest that the rapid adoption of AI is increasing the fortunes of companies in the space. But investors should be careful not to assume. All AI stocks are built to equal, rather ensure that the companies they invest in continue to execute on the opportunities presented by AI.
In terms of prices, Intel, Oracle, and Taiwan Semiconductor are all there. relatively Cheap, selling for 32 times, 24 times, and 23 times forward earnings, make each a buy for investors with a long-term view.
Each of these stocks has interesting potential, especially when viewed in terms of the opportunities presented by AI.
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John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Danny Vena has held positions at Alphabet, Amazon and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and the following options: Long January 2023 $57.50 calls on Intel Long January 2025 $45 calls on Intel Long January 2026 $395 calls on Microsoft Short January 2026 $405 calls on Microsoft and short May 2024 $47 calls Intel Motley Fool has a disclosure policy.
Why Taiwan Semiconductor, Intel, and other artificial intelligence (AI) stocks rallied on Thursday was originally published by The Motley Fool.