What Elon Musk’s Game-Changing Supercomputer Means for the AI Revolution Editor’s Note: My colleague Louis Navellier beat just about everyone in the AI Boom by recommending Nvidia years before we all started talking about ChatGPT, LLMs, and nuclear-powered hyperscale data centers. And his Growth Investor members benefited immensely. At last count, they’re sitting on about 3,300% open gains.
However, the massive stock returns we’ve seen from the builders of the AI “superhighway” may be approaching their end. As the AI Revolution accelerates, AI itself isn’t going to take over the world — but businesses using this impactful technology will. That’s why I’ve invited Louis here today to tell us about the next huge AI stock winners: the companies building new businesses on top of the AI superhighway.
In fact, I recently worked with Louis and our colleague Eric Fry to put together a portfolio of the best of the best of these stocks. And we held a special free broadcast to tell folks all about it. You can read Louis’ piece below – and catch up on our broadcast together here. These days, many tech enthusiasts and market watchers recognize Elon Musk and Sam Altman as rivals. But it wasn’t always that way. The two helped start OpenAI in 2015 with a shared vision of advancing artificial intelligence. But by 2018, it became clear that the two tech visionaries had different ideas about what that would look like (though, that’s another story for another day). So, Elon Musk left OpenAI. And a few years later – in 2022 – ChatGPT-4 debuted and kickstarted the AI Revolution. Not to be outdone, Musk founded his own AI startup in 2023: xAI. And since then, the world’s richest man has been working furiously to catch up in the AI race. One way he’s been doing this is through Colossus, the world’s largest supercomputer. Located in Memphis, Tennessee, it currently has 100,000 graphics processing units (GPUs) and was built within 122 days. This kind of project typically takes months or even years to build. If that weren’t enough, earlier this month, we learned that Colossus is about to get a LOT bigger. The Greater Memphis Chamber announced that xAI will begin expanding its supercomputer to hold at least 1 million GPUs. The GPUs are used to train xAI’s chatbot, Grok, which was the first product to come out of the startup. Two AI companies are key in this expansion: Nvidia Corp. (NVDA) and Super Micro Computer Inc. (SMCI). The former supplies Colossus with its GPUs, and the latter, along with Dell Technologies Inc. (DELL), assembled the supercomputer’s server racks. These are, essentially, a specialized cabinet used to organize multiple servers in a data center. The three tech giants plan to establish operations in Memphis to support the Colossus buildout. Now, Nvidia and Super Micro have been under Wall Street’s microscope lately as recent pressure on their share prices continues to mount. So, in this letter, I want to talk about the ramifications of this announcement on the AI Revolution. I’ll also briefly address the reasons behind Nvidia’s and Super Micro’s pullbacks this week, and whether investors can feel confident in these names moving forward. Finally, let’s take a look at where to learn about the AI stocks primed to benefit from all of this work by the builders of the AI superhighway… China Goes After Nvidia Let’s talk about some of the latest news regarding Nvidia. You probably noticed that the stock fell roughly 6% over the past week or so. That came after China accused the company of being a monopoly and opened an investigation into Nvidia. Well, my comment is this: Of course, it’s a monopoly – that’s why I recommend it! I believe Nvidia is the stock of the decade because of its monopolistic characteristics. In other words, it is so dominant that there are virtually no competitors. The reality is China is very frustrated with the Biden administration, which has restricted the type of chips that Nvidia can sell to China. At one time, Nvidia modified its chips to shrink the bus width, which is the rate of data transfer, and shipped those chips to China. But that wasn’t enough for the Biden administration, and Nvidia had to modify the chips further. These technology curbs and uncertainty about the types of restrictions the incoming Trump administration could put into place has China lashing out. But I don’t want you to worry. Nvidia’s fundamentals have not changed. All that happened was that the trading algorithms of major institutions and hedge funds saw negative news and hit the stock. Super Micro Gets a Key Extension You may recall that Super Micro found itself in hot water earlier this year when Hindenburg Research, an unscrupulous short seller, issued a report claiming that the company committed accounting violations based on the story of a disgruntled former employee. After an independent review, no evidence of accounting fraud was found. Shares of SMCI surged 30% in one day following the news. Then, on Friday, December 6, the Nasdaq granted Super Micro’s request for an extension to allow more time to submit its 10-K and 10-Q filings, along with any other required reports. Super Micro now has until February 25, 2025, to file all required reports to remain listed on the Nasdaq. This triggered another 7% pop in the stock. In recent comments, CEO Charles Liang says that he is confident the company will meet the deadline. That didn’t stop investors from taking profits, though, and the stock was down about 11% over the past week. The bottom line is that Super Micro continues to dominate liquid-cooled AI chips in data centers, which are becoming faster and faster all the time. So, the company’s solutions remain in hot demand. Super Micro even revealed recently that it shipped a record 100,000 GPUs in the most recent quarter. What’s more, an article in Investor’s Business Daily recently pointed out that Super Micro’s customers are sticking with the company. In other words, the company’s massive order backlog persists – and the company is on track to ramp up production at its new plant in Malaysia in the first half of 2025. It’s also important to remember that this has always been a very volatile stock. So, while the stock is down over five trading days, it has still risen about 60% over the last month. Your Next Move... From what I can see, the AI Revolution isn’t slowing down any time soon. It is in full force and will stay that way for the foreseeable future. This latest news from xAI is proof of that. Planning to make what is already the world’s largest supercomputer 10 times more powerful just speaks to the magnitude of the arms race taking place between not only xAI and OpenAI, but dozens of other well-funded AI unicorn startups – not to mention Big Tech. And as long as this enormous arms race continues, there’s nothing to worry about with Nvidia and Super Micro. But the AI Revolution is about to enter a completely new phase, and you need to be prepared for what comes next... Remember; the World Wide Web was invented in 1989. But it wasn’t until five years later that Amazon.com Inc. (AMZN) would make its first online sale. After that, the rest was history. Now, consider a new report from Goldman Sachs, which estimates that just 6.1% of American companies are actually using AI. Large companies with over 250 employees lead the way, with an adoption rate of 10% — with industries such as finance and insurance in front. What this tells me is that we haven’t seen anything yet, folks. The reality is that most people – and even people at most large companies – have yet to interact with AI in a meaningful way. That will all start to change in 2025 when a new set of powerful “thinking” AI models are released. Because of this, the next huge AI stock winners will be the companies building new businesses on top of the AI superhighway that the likes of Nvidia and Super Micro built. Now, it’s rare that you can get three people to agree on anything these days... but this is one area where my InvestorPlace colleagues Eric Fry and Luke Lango both agree with me. And that’s why we’ve put together a special AI Day One presentation that tells you everything you need to know to profit… and lets you in on how to get our portfolio of the next wave of AI stock winners. Go here to watch that free broadcast now. Sincerely, | 
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