Investment Opportunities in the AI Computing Power Era: In-Depth Analysis of U.S. Server Concept Stocks in 2024

In recent years, server concept stocks have surged strongly in the US stock market, becoming a focal point of technology investment. This phenomenon is no accident — as artificial intelligence and big data continue to develop deeply, the demand for computing infrastructure has shown exponential growth, driving the prosperity of the entire server ecosystem.

Why Server Concept Stocks Are Worth Attention

Explosive Growth in Computing Power Demand

Since the launch of ChatGPT, global tech companies have launched AI large model reserves competitions, leading to a sharp increase in demand for computing power. According to Huawei GIV forecast data, global intelligent computing power will reach 52.5 ZFLOPS by 2030, with a CAGR of up to 82.65% from 2021. This means that in the next decade, data processing and storage capabilities will become core competitive advantages for enterprises. Server concept stocks are riding this wave of technological upgrade, benefiting the entire industry chain from chip manufacturing and network equipment to data center operations.

Accelerated Data Center Construction

Cloud computing and data center construction have become key investment areas worldwide. Major tech giants have announced massive data center expansion plans, directly boosting demand for server hardware, cooling systems, power supplies, and related products. Meanwhile, the explosive growth of IoT devices has further amplified the need for data processing and communication capabilities.

Long-term Investment Value

Unlike short-term speculation, server concept stocks represent long-term technological progress and industrial upgrading. As global central banks enter a cycle of rate cuts, data center stocks in the form of REITs will also see valuation increases.

Interpretation of Servers and Server Concept Stocks

Servers are essentially dedicated computer systems that handle data processing, storage, and transmission. In the modern digital economy, servers form the core infrastructure of cloud computing, web applications, virtualization, and more. Server concept stocks include hardware manufacturers, network equipment providers, data center operators, and cloud service providers.

Top 5 Server Concept Stocks to Watch in 2024

NVIDIA (NVDA): Absolute Leader in AI Chips

As the global leader in GPU chips, NVIDIA’s products are widely used in data centers and AI servers, with market share far ahead. CEO Jensen Huang predicts the arrival of the era of millions of GPUs in data centers, meaning that every cloud interaction may soon require generative AI support.

Financially, after the AI wave exploded in 2023, NVIDIA’s performance surged remarkably. Free cash flow skyrocketed from $3.81 billion to $27.02 billion. Revenue in the last four quarters not only continued to grow but also repeatedly exceeded market expectations. The May 2024 earnings report showed data center revenue increased by 427% year-over-year to $22.6 billion, driven by large shipments of Hopper series GPUs (including H100). The upcoming Blackwell architecture GPU is expected to bring a new growth wave.

The company is also continuously strengthening its technological barriers. By developing the CUDA parallel computing platform, developers can fully leverage GPU’s powerful computing capabilities, greatly accelerating application performance, forming an insurmountable competitive moat.

Technically, the stock price experienced two upward waves around $45 this year. Currently, technical indicators are beginning to weaken, as the market digests stock splits and executive share reductions. In the short term, a consolidation period of several weeks may be needed. Investors might consider entering when the price falls below the 50-day moving average, or chase after a breakout above $140.

Oracle (ORCL): Powerhouse in Cloud Infrastructure

As a leading company in the tech industry, Oracle has increased its investment in data center business in recent years. In Q3 of fiscal 2024, the company’s cloud infrastructure and software services revenue surpassed traditional software licensing revenue for the first time, marking a successful strategic shift.

Management revealed ambitious expansion plans. CEO Safra Catz stated the company plans to invest about $10 billion in data center expansion in the next fiscal year (a significant increase from the $7-7.5 billion in this fiscal year). Chairman Larry Ellison described a data center in Salt Lake City large enough to hold eight Boeing 747s, highlighting the importance placed on AI infrastructure.

Benefiting from strong demand for OCI (Oracle Cloud Infrastructure), the company forecasts double-digit revenue growth in fiscal 2025. The CEO indicated that as OCI capacity gradually catches up with demand, quarterly growth will accelerate compared to previous quarters. Although occasional results may fall slightly below expectations, the overall trend remains stable.

Oracle combines growth and cash flow advantages. Although its dividend yield is only about 1.4%, stable dividend growth continues to attract institutional and long-term investors. Technically, the stock has risen nearly 80% since 2023, with a gap-up after the June earnings report, and RSI overbought and then retreating. Short-term investors may look for pullback opportunities, with the $130 support level above the previous high of $154 in 2024, and potential to rise to $180 or higher in the next two years.

Cisco Systems (CSCO): Pioneer in Network Infrastructure

Founded in 1984, Cisco is a global leader in network communication equipment, holding over 40% market share in enterprise network infrastructure worldwide. The company’s business covers R&D, manufacturing, and sales of internet protocol, network products, and services.

In 2023, Cisco made nine acquisitions, continuously expanding into cloud and AI-driven cybersecurity. The recent acquisition of Splunk is a key step, making it one of the top enterprise software companies globally and bringing more stable recurring revenue.

In June this year, Cisco launched an innovative product developed jointly with NVIDIA — Cisco Nexus HyperFabric AI clusters, an integrated AI data center solution. This provides a complete ecosystem for deploying generative AI and other AI applications locally: servers, storage, network devices, and AI software. Management stated this will be the first data center product line supporting cloud management, demonstrating Cisco’s innovation and market position in servers.

Over the past seven years, Cisco’s annual revenue has maintained steady growth, often slightly exceeding market expectations. The market generally expects the company to maintain EPS around $3.7 in the coming years. With stable dividend policy, it attracts funds and long-term investors. If cooperation with NVIDIA drives revenue beyond expectations, the stock price could further rise.

On the technical side, the daily DMI and MACD recently experienced golden crosses, indicating increasing upward momentum.

Digital Realty Trust (DLR): Income Stock in Data Center Real Estate

Digital Realty Trust is one of the world’s largest data center operators. Its business model is unique: leasing data center space to various enterprises for deploying networks and storage equipment, and even leasing entire data centers to competitors like Equinix.

Compared to struggling traditional commercial real estate in recent years, data center real estate has a brighter outlook. Industry demand is steadily rising, and once tenants set up, migration is difficult, creating high customer stickiness. This certainty is attracting funds that previously invested in other REITs or fixed income assets.

The Fed’s interest rate policies significantly impact REIT valuations. Generally, REITs are more attractive during rate-cut cycles. Currently, global central banks are lowering rates, which is favorable for REIT investors.

Technically, MACD and DMI signals show a correction. Bullish investors may consider entering near the upward trend line at around $140, with the first target at the previous high of $154 in 2024, and potentially rising to $180 or higher over the next two years.

Vertiv Holdings (VRT): The Fastest Growing Dark Horse

Vertiv Holdings is a leading global provider of digital infrastructure, headquartered in Ohio, USA, with operations in over 130 countries. The company focuses on designing, manufacturing, and maintaining critical infrastructure for data centers, communication networks, and industrial applications.

Its growth rate is remarkable. In 2023, EPS reached $1.77, up 233% year-over-year, driven mainly by improved gross margins. Market expects over 30% growth in 2024. The upgrade in credit ratings also confirms the company’s improving trend: Moody’s upgraded its credit rating to Ba3 in December 2023, and S&P to BB, reflecting better operational performance, strong cash flow generation, and expanding profit margins.

Although dividends increased significantly in 2023, the dividend yield remains below 0.1%, as the company is in an expansion phase with high capital expenditure, typical of growth stocks suitable for investors with higher risk tolerance.

Technically, the stock has been stable within an upward channel this year, recently testing the channel bottom during a correction. MACD is expected to generate a golden cross in the short term. Investors may consider buying on dips at the channel bottom, with a target of $110; if it breaks below the channel, set a stop-loss accordingly.

Multiple Ways to Invest in Server Concept Stocks

Investors can choose different investment methods based on their capital size and risk appetite:

Direct Stock Purchase

This is the most traditional approach, suitable for investors with sufficient funds who wish to hold long-term. The advantages are clear ownership and direct dividend receipt.

Contract for Difference (CFD) Trading

CFD trading is achieved through contracts with brokers, allowing investors to profit from stock price movements without owning the actual shares. This method is especially suitable for:

• Small-cap traders who want to leverage short-term market volatility
• Investors seeking short-selling opportunities

The core advantage of CFDs is leverage. Investors only need to pay a margin to control larger positions, participating in bigger trades with less capital. However, higher leverage also means increased risk. Investors should choose leverage ratios carefully according to their risk tolerance.

Brokers like Mitrade, regulated by ASIC, CIMA, and other international financial authorities, provide a safe trading environment. A single account can trade hundreds of assets including stocks, forex, gold, oil, and Bitcoin, with deposits and withdrawals supported in New Taiwan Dollars, and a low trading threshold of $50.

Other Investment Tools

Besides the above, investors can also consider options trading, ETFs, mutual funds, and other methods, flexibly combining according to their needs.

Future Outlook for Server Concept Stocks

After the broad rise driven by the 2023 AI wave, many server concept stocks entered a correction phase in Q2 2024. However, since global tech giants, startups, and governments are still competing to enhance computing infrastructure, a new upward wave is expected to begin in Q3 after completing the correction.

Over the next five years, industry consolidation and淘汰 are expected. Leading chip and network equipment companies like NVIDIA and Cisco, as well as stable rental REITs like Digital Realty Trust, offer high certainty and are suitable for conservative investors to diversify long-term allocations.

Key Factors Influencing the Trend of Server Concept Stocks

Market Demand and Technological Trends

Data processing needs, AI development progress, and IoT penetration directly impact valuations. For example, when the market expects NVIDIA’s EPS to grow nearly 100% and maintain high double-digit growth over the next two years, it can justify a PE ratio exceeding 200.

Industry Competition Landscape

Performance of competitors and industry competition intensity affect product pricing, gross margins, and EPS. Fierce competition forces price cuts, squeezing profit margins. If profits decline significantly, server concept stocks may also face sharp declines.

Company Performance and Management Capability

Ultimately, investors are betting on industry prospects and on the profitability and management of specific companies. The rapid growth of Apple during Jobs’ era and Tesla under Musk’s leadership was mainly due to leadership breakthroughs in technology bottlenecks, continuous innovation, disruptive products, and creating huge business value. Excellent leadership plays a decisive role in stock performance.

Summary

The demand for computing power driven by AI is growing rapidly, and the outlook for server concept stocks remains optimistic in the long term. Market enthusiasm for niche areas is also shifting, from power supply, cooling systems, data center REITs, to traditional infrastructure construction, presenting investment opportunities at different times. For insightful investors, server concept stocks are still a promising sector for long-term attention and deployment.