Lisa Su, president and CEO of AMD, during an interview with Mad Money, broadcasting from CNBC’s San Francisco bureau on November 21, 2019.
Jacob Jimenez | CNBC
The big winner for investors this year in the generative AI boom has been Nvidia. The company’s stock price rocketed 234% as demand soared for the chipmaker’s processors that are designed to handle the hefty compute loads required to train and run large language models.
The LLMs from Microsoft-backed OpenAI and others relying on Nvidia’s technology can turn users’ text-based prompts into pictures, poems or PowerPoint presentations.
While Nvidia sucked up the bulk of the profits — net income through the first three quarters of the year jumped sixfold from 2022 — it wasn’t the only stock that attracted Wall Street’s attention in the race to make money from artificial intelligence.
Software vendors CrowdStrike, HubSpot and Salesforce all at least doubled this year, far outperforming the Nasdaq, which was up 43% as of Friday’s close. Those companies got a boost after announcing enhancements that draw on generative AI.
But when it comes to the hardware and infrastructure underlying the advancements in AI and ensuring that there’s enough capacity going forward, investors are looking at who, other than Nvidia, stands to gain. The iShares Semiconductor ETF has rallied 64% this year. The data center is another source of optimism, and a few cloud service providers are positioned to win business as organizations boost spending on technology to help them run generative AI services.
Here are three other stocks gaining momentum due to the generative AI wave:
AMD
As the company whose technology is viewed as most likely to challenge Nvidia’s AI chip monopoly, Advanced Micro Devices has a big cheering section in the software developer community. The stock is up 116% for the year as of Friday’s close.
AMD just launched its MI300X AI processors, pursuing a market for AI chips that CEO Lisa Su projects will climb to $400 billion over the next four years. Meta announced in December its plans to use the new processors, and Microsoft is also a committed customer.
Su pointed to performance advantages in comparison with Nvidia’s H100 chip.
“AMD remains extremely well positioned to take advantage of the rapidly expanding AI TAM, as they continue to stack up customer partnerships and roll out products with impressive (and extremely competitive) performance metrics,” Deutsche Bank analysts wrote in a note to clients after the announcement earlier this month.
Since its public market debut almost a decade ago, Arista has been gaining on Cisco in the market for data center networking gear. Excitement around its position in AI helped push the stock up 96% this year.
President and CEO of Arista Networks, Jayshree Ullal.
Scott Mlyn | CNBC
In October, Arista added AI to a key customer segment so it’s now called Cloud and AI Titans. More than 40% of the company’s 2022 revenue came from Meta and Microsoft. The following month, Arista CEO Jayshree Ullal announced a goal of $750 million in 2025 AI networking revenue, prompting Citi analysts to lift their price target on the stock to $300 from $220.
Companies have been choosing Arista hardware to connect their GPUs to the internet. As models get bigger and workloads more complex, Arista has an opportunity to connect GPUs to one another to help scale the technology.
Arista executives see a moderation in enterprise spending in 2024 after years of cloud expansion, with organizations testing out systems before making large-scale AI deployments that could start in 2025.
Cloudflare
For years, Cloudflare has ensured that online content can be quickly served up to end users by creating a global network of data centers that protects websites from attempted takedowns.
One key customer is OpenAI. When a user attempts to access OpenAI, Cloudflare’s technology verifies that it’s a person and not a bot on the other end. The company is now aiming to become part of the fabric for running AI models and ensuring rapid response. In September, the company announced a service called Workers AI, which runs on Nvidia’s GPUs and will be spread across 100 cities.
“With a consumption pricing model, these services could drive meaningful upside to revenue as adoption ramps through 2024,” Morgan Stanley analysts, who have the equivalent of a hold rating on the stock, wrote in a November report.
Chinese tech company Tencent is a gaming giant and the parent company of WeChat, the ubiquitous social messaging app in China.
Cheng Xin | Getty Images News | Getty Images
Chinese social media and gaming company Tencent on Wednesday reported better-than-expected profit in the third quarter, spurred by growth in games, advertising and cloud services.
Tencent reported profit attributable to shareholders of 53.23 billion yuan ($7.37 billion) in the third quarter, compared with a LSEG estimate of 46.18 billion yuan over the period.
The company’s revenue came in at 167.19 billion yuan, short of the 167.82 billion yuan analyst forecast.
The West shouldn’t assume that China is lagging behind the U.S. and Europe on tech developments, Microsoft’s president and vice-chairman warned.
U.S-China tensions in the past few years have centered on the battle between the two nations for tech supremacy, culminating in a slew of export controls on critical technologies. Late last year, China’s Huawei surprised the market with the release of a smartphone whose reviews indicated downloads speeds associated with 5G, sparking speculation of an apparent chip breakthrough that defied U.S. tech sanctions.
Speaking at the Web Summit tech conference in Lisbon, Portugal, on Tuesday, Microsoft’s Brad Smith told CNBC that “in many ways,” China is close to or is even catching up on technology.
“I think one of the dangers, frankly, is that people who don’t go to China too often assume that they’re behind,” he told CNBC’s Karen Tso. “But when you go there, you’re impressed by how much they’re doing.”
He predicted that Chinese and American companies will be competing on technology into the distant future and urged U.S. and European companies to collaborate to grow economies and bring new advancements like artificial intelligence to the rest of the world.
Microsoft CEO Brad Smith participates in a meeting at The Westin Palace Hotel, on 20 May, 2022 in Madrid, Spain.
Cezaro De Luca | Europa Press | Getty Images
Microsoft has operated in China since 1992, according to the company’s web page, including through its largest research and development center outside the U.S. Microsoft CEO Satya Nadella said last year that the firm wasn’t focused on China as a domestic market, but that it provides services to Chinese companies and has a more visible presence locally than do many other U.S. tech giants.
Asked about whether trade and tech transfers — or the movement of data, designs or innovations — with China will get more challenging as Washington transitions between the administrations of U.S. incumbent leader Joe Biden and President-elect Donald Trump, Smith it was too early tor know.
“The truth is, as an American technology company, we can do business in China only when we are offering a service that the Chinese government wants to have there, and the U.S. government wants us to bring there,” he said, adding, “And in some cases they look at, say, a data center to support a Mercedes or a Siemens or a Starbucks or a General Motors — there seems to be a level of comfort. In consumer services, not really.”
He predicted that we’ll live in a world where some technology will move to China, and it won’t be the tech firms that decide.
Vasco Pedro, co-founder and CEO of Unbabel, on the first day of the 2023 Web Summit at the Altice Arena in Lisbon.
Miguel Reis | SOPA | Lightrocket | Getty Images
LISBON — Unbabel on Wednesday announced a translation service powered by artificial intelligence, adding another rival to a highly competitive space — with its CEO warning that humans may not be needed for translation at all in three years.
Widn.AI is Unbabel’s new product and is based on the company’s proprietary large language model (LLM) called Tower. An LLM is an AI model that underpins applications like OpenAI’s ChatGPT.
Unbabel’s LLM allows AI translation in 32 languages, Vasco Pedro, the company’s CEO, told CNBC in an interview at the Web Summit in Lisbon.
“When we started in Unbabel 10 years ago, AI was not at the stage that it is now, and so we were very much focused on creating hybrid solutions that would combine AI and human,” Pedro said.
“But I think for the first time, we believe that translation is now fully in the realm of AI capabilities, and that you can do a lot of things without needing humans at all in the case of translation.”
Unbabel’s traditional product was one that combined so-called machine learning, a type of AI, to translate words, but with human editors to check the final product.
Pedro said Widn.AI will not require humans.
“I think humans still have a slight advantage in very hard use cases. But that advantage right now is so razor thin that except for really the … most difficult use cases, we believe AI is getting really there, and it’s hard for me to see right now how three years from now, you will need humans to be translating anything,” Pedro said.
“There’s still going to be humans responsible for making sure that things get translated and are delivered in the right places,” he added.
Widn.AI is the latest product in an increasingly competitive market which includes Google Translate and products from German startup DeepL.
Those companies see translation as a key area in which LLMs can be used effectively and have trained models specifically to tackle various languages.
Pedro acknowledges that the revenue per translated word is going to “drastically reduce.” But he said there will be an increase in the amount of content translated which will sustain the company’s growth.
Unbabel is speaking to investors and is looking to raise between $20 million and $50 million in funding to fuel the growth and development of Widn.AI, according to Pedro.