The US stock market is caught in the AI gold rush. Besides NVIDIA, which other "gold mines" will shine?

Zhitong App noticed that fund managers are rushing to make money by taking advantage of the stock market's interest in artificial intelligence. The astonishing rise in NVIDIA's stock price has sparked a search for other companies utilizing AI technology. NVIDIA's chips are the gold standard in the AI industry. After doubling in 2023, the company's stock price has risen by about 60% this year. This surge has pushed its market value to around $2 trillion, making it the third-largest company in the U.S. after Microsoft and Apple. This has also prompted Wall Street to seek out other AI-focused companies, hoping to catch the wave. Whether investors are focusing on the broader chip industry or betting on other companies in the value chain, they all agree on one thing: AI is here to stay. Francisco Bido, Senior Portfolio Manager of the Large Cap Focused Fund under F/m Investments, said, "This is not a passing fad." "There are too many... companies that can effectively use this technology to boost their revenue and profits." Excitement over AI has driven the Nasdaq Composite Index to a record high on Thursday, with the S&P 500 Index also hitting a new high. Both indices have risen by about 7% so far this year. Further signs of increasing interest in AI are easy to spot. Goldman Sachs recently stated that mentions of AI on earnings conference calls reached a new high in the fourth quarter of last year. Analysts at the bank estimate that if AI technology is widely adopted in the next 10 years, it could contribute 1.5 percentage points to U.S. productivity growth. In a report this week, Morgan Stanley stated that a survey of Chief Information Officers showed that 2024 is the "investment year for AI," with CIOs for the first time ranking AI/machine learning as their top priority. Bido's fund still holds a large number of NVIDIA shares but has also ventured into other AI areas, including competitors like chipmaker AMD and MongoDB. With AI poised to change data infrastructure needs, there could be significant demand for MongoDB's database products. Compared to NVIDIA and some other AI companies that have recently attracted market attention, while the stocks of these companies have not risen as sharply, they have also seen significant gains. For example, AMD's stock price has risen by 30% year-to-date, while Mongo's stock has risen by 9%, although both companies' stock prices doubled last year. In contrast, server component supplier Super Micro and chip design company ARM saw their stock prices rise by about 200% and 90% in 2024, respectively. SMCI's stock price doubled in 2023. Ivana Delevska, Founder and Chief Investment Officer of Spear Invest, stated that NVIDIA remains the largest holding in their Spear Alpha ETF. The exchange-traded fund also seeks to capitalize on the growing demand for cybersecurity related to artificial intelligence by holding shares of Zscaler (ZS.US). At the same time, the fund is positioning itself in Snowflake (SNOW.US) to benefit from the demand for data infrastructure. However, despite the higher profile of artificial intelligence technology, there are still risks associated with investing in stocks that are often volatile. For example, Snowflake's stock price fell by 18% on Thursday as the company projected annual revenue below Wall Street's expectations and disclosed the unexpected retirement of its CEO. King Lip, Chief Strategist at Baker Avenue Wealth Management, mentioned that as NVIDIA's stock price rises, the company has reduced its holdings in NVIDIA to avoid dominating clients' investment portfolios. Nevertheless, the company has recently started building positions in TSMC (TSM.US), a major supplier to NVIDIA. "If you still want to invest in artificial intelligence but are a bit concerned about NVIDIA's stock price, I think TSMC is a no-brainer choice," Lip said. Que Nguyen, Chief Stock Investment Officer at Research Affiliates, is looking for semiconductor companies with reasonable valuations that are poised to benefit from artificial intelligence. This includes Lam Research Corp (LRCX.US), which provides equipment for the semiconductor industry, and Micron Technology (MU.US), which produces storage chips and data storage. Lam Research's stock price has risen by about 20% year-to-date, while Micron has increased by 6%. Nguyen stated, "Large language models not only require processing power but also storage." Of course, many investors are happy to maintain significant positions in NVIDIA. Portfolio manager Zehrid Osmani mentioned that nearly 10% of assets in the Martin Currie US Unconstrained Fund are in NVIDIA stock, making it the fund's largest single-stock investment. He believes the company will maintain a competitive edge due to its higher research and development investments compared to its competitors. "We have a high level of confidence in this name, as reflected by the high position size," Osmani stated.