Tsmc, Broadcom and more. Who will celebrate with the boom of artificial intelligence
The growth of AI-related technologies is just one of the enduring and long-term trends we examine to discover companies that may offer the highest growth potential. The analysis of Christophe Braun, Investment Director, Capital Group.
The global Artificial Intelligence market is estimated at $120 billion, a figure that some research institutes expect to expand several times to $1.6 trillion by 2030 as the technology progresses.
Currently, the AI market can be classified into four segments: Compute, Infrastructure, Developers and Applications. Most of the hype surrounding AI is focused on developers like OpenAI (the company behind ChatGPT), but in reality the vast majority of AI-related spending is in the compute segment.
While it's hard to predict what AI could become in the next decade, what we do know is that AI models require massive amounts of data collection, scrubbing, and analysis. As tasks become more complicated, so does the computing power required. Taiwan Semiconductor Manufacturing Company (TSMC), one of the largest semiconductor manufacturers in the world, may be in a unique position to tap into this insatiable appetite for computing power. Since 2013 the company has increased its dividends by increasing revenues due to the growth of market share in cutting-edge manufacturing.
Broadcom's business is another major beneficiary of AI. The company specializes in manufacturing application-specific integrated circuits (ASICs), which are critical for connecting AI clusters and driving traffic into and out of data centers. Since 2010 Broadcom has increased its dividends by increasing revenues especially in semiconductors for communications.
On the other hand, technology infrastructure providers such as Microsoft are also key to the development of AI, given the role they play in storing, securing and transferring data. The influx of data expected from the growing adoption of AI has seen an increase in demand for Platform-as-a-Service (PaaS) or Infrastructure-as-a-Service (IaaS) providers. These third-party vendors provide the infrastructure (both hardware and software) that enables companies to build, test, deploy, and scale applications without the added complexity of having to build their own workspace. Microsoft is not only one of the largest cloud infrastructure providers in the world, but it is also actively engaging in software development by incorporating AI tools into its operating system, business and healthcare product lines. Its dividends have grown steadily since 2005 and could continue to increase if AI revenues pick up.
But the growth of AI-related technologies is just one of the enduring and long-term trends we examine to discover companies that may offer the highest growth potential. Others include healthcare innovation for an aging population, clean energy transition, and digital transformation. Exposure to dividend paying companies that build on such long-term secular trends can help meet the needs of tomorrow's investors through income growth and capital appreciation.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/tsmc-broadcom-e-non-solo-chi-festeggera-con-il-boom-intelligenza-artificiale/ on Sun, 03 Sep 2023 05:52:23 +0000.