Key Takeaways
- Artificial intelligence (AI) has been an important theme of the first half of 2024, with the emerging tech fueling stock growth for chipmakers like Nvidia and partners such as Super Micro Computer and Micron Technology.
- Big tech companies like Meta Platforms and Google parent Alphabet, as well as legacy computer companies Dell Technologies and HP, have also benefited from enthusiasm for AI.
- Investors could view the stock gains in the first half of the year as an indicator of the companies’ positioning amid the AI boom that experts say is just getting started.
Artificial intelligence (AI) developments captured investors’ attention in the first six months of 2024, with AI-related momentum leading several tech stocks to outpace the S&P 500 and the Nasdaq Composite indexes in the first half of the year.
Some of the biggest beneficiaries have been chipmakers like Nvidia (NVDA) and its partners such as Super Micro Computer (SMCI) and Micron Technology (MU). Tech giants, including Meta Platforms (META) and Google parent Alphabet (GOOGL), and legacy computer companies such as Dell Technologies (DELL) and HP (HPQ) have also gained on enthusiasm for AI.
While past performance isn’t necessarily a predictor of future returns, investors might consider the stock gains in the first half of the year as an indicator of the companies’ positioning amid the AI boom, though experts say the AI era could just be getting started.
Chipmaker Nvidia and Its Partners Among Biggest Beneficiaries of Booming AI Demand
Semiconductor industry stocks have been some of the biggest beneficiaries of the AI boom as the emerging tech requires advanced computing hardware produced by chipmakers.
Nvidia shares have more than doubled since the start of the year, after more than tripling in 2023. The chipmaker has become an AI heavyweight as the demand for Nvidia’s graphics processing units (GPUs) has surged as companies build and train AI systems.
Nvidia founder and CEO Jensen Huang earlier this year unveiled the Blackwell platform, the company’s most capable and efficient system, which analysts called “the most “most ambitious project in Silicon Valley.” Rosenblatt analysts said Blackwell products, B100, B200, and GB200, are likely “already sold out well into 2025.”
“The semiconductor giant ranks first among peers in terms of growth, gross margins and return on invested capital,” Melius Research analysts wrote, commenting on the stock’s room to grow.
Shares of AI hardware maker and Nvidia partner Super Micro Computer have also more than doubled in price since the start of 2024 after tripling in 2023. Rosenblatt analysts called Super Micro Computer the “Switzerland of AI” since its liquid cooling tech is essential in deploying advanced AI systems, and JPMorgan analysts suggested its rise has signaled the “investment cycle relative to AI has just started.” Super Micro Computer joined the S&P 500 index in March.
Shares of Micron Technology, another Nvidia partner, gained over 46% in the first half of 2024. Bank of America analysts named Micron as a “junior samurAI” saying there could be “volatile but fruitful opportunities among the #2 vendors” like Micron as leaders like Nvidia expand the market.
Citi analysts noted that despite headwinds like increased capital expenditures for the year and the impacts of an earthquake in Taiwan in April, they expect Micron stock to grow “above its historical average but below AI peers.”
Meta and Alphabet Surge as Big Tech Giants Scale AI
Tech giants like Meta and Google parent Alphabet have also seen their stocks surge in the first half of the year as the companies leveraged their positions in the industry and their ability to meet the capital-intensive needs of AI advancement to lead developments in the space.
Meta Platforms shares gained over 31% in the first half of 2024. Jefferies analysts have said the company could be well-positioned to outpace peers in the digital ad space as it leverages AI tools. The company unveiled its own AI assistant, MetaAI, integrated into Facebook, Instagram, and WhatsApp, in April.
When Meta announced it would be significantly increasing spending to invest in AI, it sent the stock tumbling, but analysts said increased spending could be key to securing AI leadership.
William Blair analysts said “the scale and timing of the generative AI investment will be larger and longer than previous platform investments,” but they “believe it is still exercising prudence in spending and ultimately will be one of the leaders in the AI race,” though they noted it “may take some time and further proof points to investors.”
Google parent Alphabet shares gained 23% in the first half of the year, with its market capitalization passing $2 trillion after hosting its AI-focused Google I/O conference in April. Bank of America analysts said the conference highlighted “expectations for double-digit revenue growth, Cloud margin expansion, and opportunity to capitalize on strong AI assets.”
Both Alphabet and Meta announced they were making custom silicon chips to run AI workloads in the first half of 2024. Microsoft (MSFT) and Amazon (AMZN) also make their own AI-capable custom chips. The big tech companies’ in-house chips could reduce their reliance on Nvidia and help manage costs, though they might not keep up with the advanced capabilities of Nvidia’s chips.
Legacy Computer Companies Also Share in AI Gains
While legacy computer makers may not be the first companies to come to investors’ minds when thinking about AI, companies like Dell Technologies and HP have also benefited from AI enthusiasm.
Dell’s stock price soared 82% in the first half of the year, with the stock seeing double-digit single-day moves on AI momentum. Dell could see gains as a service provider as it ramps engagement with Nvidia, JPMorgan analysts wrote in a report titled “Forgotten AI Warriors in Hardware.”
After Dell’s first-quarter earnings failed to impress investors and sent the stock tumbling this week, the company said it expects to tackle its AI server backlog as Nvidia GPU supply improves as it works to improve its margins.
Despite this week’s decline, Bank of America analysts reiterated a “buy” rating for Dell, saying “we are still in the early stages of AI adoption with continued strong pipeline and momentum around AI servers,” adding that Dell could be able to “capture higher AI margins over time.”
HP shares have added about 21% in the first half of 2024, as the legacy tech company signals to investors that it is a beneficiary of the AI boom. Shares jumped this week after the company reported strong earnings and expected gains amid an AI PC accelerated upgrade cycle for consumers and enterprise customers.
Microsoft recently unveiled a new category of Windows PCs designed for AI workloads, with Dell and HP among the original equipment manufacturer (OEM) partners.