This blog post was originally published as part of today’s Daily Contrarian.
Recent market activity shows investors don’t want to wait for Nvidia (NVDA) earnings tomorrow to bid up AI chip stocks. Marvell Technology (MRVL) was one of the biggest winners yesterday. Smaller AI names like Soundhound AI (SOUN) also put in rallies, as did the usual suspects AMD (AMD), Micron (MU), Super Micro Computer (SMCI), Broadcom (AVGO), and Taiwan Semiconductor (TSM).
Here’s an idea for an ETF: small AI hardware names. Limit it at, say $5 billion market cap companies. The focus on hardware would (presumably) allow for a margin of safety. It would also weed out names like the aforementioned Soundhound, C3.ai (AI), FARO Technologies (FARO), and others including companies that just plaster the term ‘AI’ all over their marketing materials to attract attention.
Unfortunately, this doesn’t leave much. The Contrarian did a preliminary search and found just a few such companies, almost all of them suppliers to the semiconductor industry. Of course, ‘undiscovered’ is a bit of a misnomer here. Investors have picked through any and every stock even remotely related to AI. Still, it’s fair to say these securities are certainly under-covered by Wall Street.
Names include ACM Research (ACMR), Camtek (CAMT), FormFactor (FORM), Ichor Holdings (ICHR), Kulicke and Soffa Industries (KLIC), Photronics (PLAB), Ultra Clean Holdings (UCTT), and Veeco Instruments (VECO).
It’s likely the AI hype story is already priced in to these stocks (didn’t check). But it may be worth putting these names in an index to track them, to the extent that somebody hasn’t done it yet. If nothing else this could give us an idea of stocks to buy when (if) there is a pullback in AI chip names.
There are obviously private companies as well, including Anthropic (OpenAI rival), Graphcore, Cerebras, SambaNova, Groq.
The Contrarian does not hold any of these stocks.
Update June 4, 2024: ACM Research will be removed from this list as the company does most of its business in China.
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