American Consumers and AI Investment Opportunities: A Crucial Moment
Hello, Reader.
One thing Americans value is a good deal. Data from Capital One’s Shopping Research, updated in December 2024, highlights this trend:
- 94% of Americans redeem at least one discount each year.
- Over 80% of U.S. consumers sign up for email offers specifically to receive discounts.
- 67% of U.S. consumers have made an unplanned purchase after being offered a discount.
Today’s happenings provide a perfect illustration of this behavior. Many restaurants are offering discounts for Cinco de Mayo, which commemorates a significant battle in Mexico’s conflict with France.
While I don’t have any food deals to highlight today, I do want to bring your attention to a company making significant strides in AI technologies. Shares of this company could see substantial growth starting as soon as tomorrow, making it worthwhile to explore now.
The company I’m discussing is a key supplier of advanced computer processors and is featured in my recommendations at Fry’s Investment report.
Business overall is thriving, yet the company’s share price remains low, trading at approximately 19 times the estimated adjusted earnings for 2025—around 20% lower than the Nasdaq Composite index valuation. This discrepancy presents a compelling investment opportunity.
The firm has excelled in profit growth and gaining market share, earning it the label of a “brown bag” buy. If we hid the company’s logo and focused purely on its financial performance, the metrics would strongly suggest we should invest in the stock.
Competing directly against Nvidia Corp. (NVDA), this firm operates in a fiercely competitive and cyclical industry. Despite strong financial performance and a robust balance sheet, investors have been pulling back on the stock for several months.
The core operations of the company are rapidly expanding, particularly its emerging data center division, which has seen remarkable growth. Last year, this division’s revenues nearly doubled, now representing half of the total company revenue.
The company’s four main business segments are:
- Data Center: Supplies server-class CPUs, GPUs, and related computing platforms for data center customers.
- Client: Provides CPUs, APUs, and chipsets to manufacturers of desktops and notebooks for both consumers and enterprises.
- Gaming: Focuses on designing processors and graphics technology for PCs, handheld devices, and gaming consoles.
- Embedded: Supplies CPUs and GPUs for a wide range of applications, including consumer electronics, automotive, and healthcare.
This company’s GPUs serve as a cost-effective alternative to Nvidia’s leading H100 and H200 models. As of December 2024, the firm had already shipped over 300,000 professional GPUs designed for AI and high-performance computing to major clients like Meta Platforms Inc. (META), Microsoft Corp. (MSFT), and Oracle Corp. (ORCL).
Additionally, the company formed a strategic partnership with Nvidia to support a funding round for xAI, co-founded by Elon Musk. This AI firm has been operating the world’s largest supercomputer in Memphis, Tennessee, since September 2024, boasting 100,000 GPUs, with plans to expand to over 1 million GPUs.
In comparison, the fastest operational supercomputer, called Frontier, only has 37,888 GPUs. Increasing the number of GPUs enhances the processing speed for AI applications, making xAI’s “Colossus” a pivotal player in AI advancements. This supercomputer has the potential to drive innovations in autonomous robotics, disease cures, and breakthroughs in clean energy.
The company is positioned to play an influential role as the AI sector evolves. A conference call with Wall Street analysts is scheduled for tomorrow, where updates on this project and future AI advancements may be revealed.
Analysts anticipate a 50% year-over-year increase in earnings per share and a 30% revenue increase, continuing a trend where the company outperformed consensus estimates in seven of the last nine quarters.
The time to invest in this multifaceted AI opportunity is now.
To delve deeper into the specifics of this company, beyond just its name and ticker symbol, visit Fry’s Investment report.
Now, let’s recap our discussions from this past week at Smart Money.
Smart Money Roundup
Why Stocks Are Soaring: Anticipating Change on May 7
Market fluctuations driven by trade-war concerns create uncertainty. Fear of tech slowdowns paralyzes potential buyers, while record levels of idle cash accompany a volatile market. Many investors feel cornered, unsure whether the next significant shift is a crash or a recovery. However, some analysts assert that these signs indicate a market bottom rather than a collapse, suggesting it could be the most promising buying opportunity observed in years.
Preparing for the Impending Retail Squeeze Ahead of May 7
Pandemic-related images of emptiness in China are now mirrored in American retail spaces. Barren store shelves are indicative of forthcoming challenges for retailers on U.S. soil.
Evaluating Market Trends Amid Ongoing Trade Tensions with China
As consumers and investors navigate the complexities of the ongoing trade war with China, it’s crucial to understand the implications for our purchases and investment strategies. My colleague Tom Yeung explores the potential effects of these prolonged trade tensions.
Magnificent Seven: Tech Earnings and Market Corrections
Last week marked a significant moment as four major companies from the “Magnificent Seven” tech stocks released their earnings reports. As we approach an uncertain economic future, I believe these firms may be on the brink of a downturn. Let’s examine the latest financial results of the Magnificent Seven and the anticipated market correction.
Three Factors That Could Revitalize the Market in May
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April’s market performance deviated from historical patterns, presenting investors with challenges like tariff disputes, inflation fears, and political instability. However, as the saying goes, “April showers bring May flowers.” My colleague Louis Navellier is looking into the early signs of recovery that may signal improved market conditions ahead.
Future Outlook
This week, I will continue to analyze key trends shaping our investment landscape against the backdrop of ongoing market volatility. Insights into these developments will be essential for informed decision-making.
For our members, the May issue of the Fry’s Investment Report will be available this Friday. Keep an eye on your inbox for the latest insights.
If you’re interested in joining the Fry’s Investment Report, you can click here for more information.
Regards,
Eric Fry
