AI's changing fortunes
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It takes a village to keep the AI economy running. From chips powering the models to the energy powering the data centers, there's a seemingly endless list of tangential players for savvy investors to back.
Why it matters: The fortunes of some service providers can shift quickly in this rapidly changing industry, as memory chips and cooling systems recently illustrate.
🔥 What's hot: Memory chip makers can't make the things fast enough.
- Demand is soaring specifically for a type of memory chip known as DRAM, which has the vital, if uncelebrated, job of storing data that the GPUs from Nvidia and AMD can quickly access to run AI models.
📈 Stocks for companies that make memory chips are soaring just as fast:
- Micron jumped 10% today on fresh news of insatiable demand. The stock is up over 245% over the past 12 months, while the other major players in the space — Samsung Electronics and SK hynix — have also seen huge gains.
🥶 What's not: Cooling stocks are cooling off.
- Servers run hot thanks to the chips inside them — and servers powering AI data centers run really hot. To this point, that's been good for business if you make cooling systems.
The latest: Nvidia CEO Jensen Huang, who tends to move markets whenever he speaks, said at the CES trade show yesterday that racks with the company's next-generation Rubin chips will be able to be cooled using room-temperature water — potentially reducing the need for expensive chillers.
📉 Stocks for companies producing chiller systems tumbled today, Bloomberg noted. Johnson Controls fell 6.2%, while Modine Manufacturing (-7.5%) and Trane Technologies (-2.5%) also slid.
The bottom line: In the AI boom, the picks-and-shovels trade can turn quickly.
