Tech Titans: Two Unstoppable Forces in the Industry
The past decade has been dominated by technology stocks, with eight of the S&P 500’s largest weightings now in technology or tech-adjacent stocks. As technology continues to revolutionize our world, it’s likely that tech stocks will remain at the forefront of the market’s growth.
Nvidia: The AI Infrastructure Leader
Nvidia has emerged as the undisputed leader in artificial intelligence (AI) infrastructure, with its graphic processing units (GPUs) providing the computing power needed to train AI models and run inference. The company’s dominance in the rapidly growing GPU space is staggering, with a nearly 90% market share. This is largely due to its CUDA software platform, which has become the de facto standard for developers programming GPUs.
As AI models continue to advance, they require exponentially more computing power and chips like GPUs to be trained on. This trend is expected to continue, with Nvidia’s largest customer, Microsoft, announcing plans to spend $80 billion on AI data centers this year. With a forward price-to-earnings (P/E) ratio of below 31 times and a price/earnings-to-growth ratio (PEG) under 1, Nvidia’s stock is reasonably priced and poised for continued growth.
Amazon Web Services: The Cloud Computing Giant
Amazon is often associated with its e-commerce platform, but its largest business by profitability is actually its Amazon Web Services (AWS) cloud computing unit. Over the past 12 months, AWS has generated operating income of $36.4 billion, outpacing the rest of Amazon’s businesses. As the first company to introduce the infrastructure-as-a-service model, AWS has become the largest cloud computing company in the world, with an over-30% market share.
Cloud computing has been a major beneficiary of AI, as organizations turn to the cloud to build out their own AI models and applications. Amazon is helping companies achieve this through its Bedrock and SageMaker solutions, which provide customers with foundational AI models and the tools to build and train their own AI models. The company has also developed custom AI chips designed specifically for AI training and inference.
Outside of the cloud, Amazon is using AI to improve its e-commerce and logistics operations, including making better product recommendations and optimizing routes for logistics and warehousing. With a forward P/E multiple of under 30 and a PEG ratio below 1.1, Amazon’s stock is reasonably valued and positioned for long-term success.
Leave a Reply