Under the 2024 US stock AI wave, five hot picks of leading server concept stocks worth paying attention to

As artificial intelligence technology accelerates development, the demand for computing power is growing at an astonishing rate. According to Huawei GIV’s forecast, by 2030, intelligent computing power will reach 52.5 ZFLOPS, with a compound annual growth rate of up to 82.65% from 2021 to 2030. This wave of technological advancement is driving leading server concept stocks to new development opportunities, which investors should pay close attention to.

Core Drivers Behind the Rise of Leading Server Concept Stocks

The Hashrate Race Fueled by Generative AI

Since the launch of ChatGPT, global tech companies have initiated a “large AI model reserve race,” with major tech giants accelerating the deployment of data center infrastructure. This trend directly boosts demand for servers, chips, cooling equipment, and related industries, providing unprecedented growth momentum for leading server concept stocks.

Expansion of Data Center and Cloud Computing Ecosystems

Enterprise demand for cloud infrastructure continues to rise, driving rapid development in data center construction and operation. At the same time, the proliferation of IoT devices is constantly increasing data processing and storage needs, forming a long-term growth support for leading server concept stocks.

In-Depth Analysis of Five Leading Server Concept Stocks

Cisco Systems (CSCO): Global Leader in Networking and Communications

Founded in 1984, Cisco accounts for over 40% of global enterprise network infrastructure. In 2023, the company actively pursued mergers and acquisitions, acquiring nine companies to expand cloud and AI-driven cybersecurity solutions. Most recently, Cisco announced the acquisition of Splunk, which will make it a heavyweight in the software industry after integration.

A highlight is Cisco’s joint development with Nvidia of the Cisco Nexus HyperFabric AI clusters, an integrated solution providing complete equipment for on-premises deployment of generative AI. Management states this will be the industry’s first data center product line supporting cloud management, demonstrating leadership in innovation among server concept stocks.

Financially, Cisco has maintained stable annual revenue growth over the past seven years. Market expectations suggest future earnings will stay around $3.7 per share, complemented by a stable dividend policy, attracting many funds and long-term investors. If the collaboration with Nvidia exceeds expectations, it could further boost the stock price.

Vertiv Holdings (VRT): Growth Stock in Data Center Infrastructure

Vertiv is a leading global provider of digital infrastructure technology, operating in over 130 countries. In 2023, the company achieved EPS of $1.77, a 233% year-over-year increase, driven mainly by gross margin improvements. Market forecasts for 2024 project over 30% growth potential.

Credit rating upgrades also reflect improved operational performance. Moody’s and S&P upgraded ratings to Ba3 and BB respectively in December last year, supported by strong cash flow and expanding profit margins. Although dividends increased significantly in 2023, the dividend yield remains below 0.1%, indicating the company is still in a high-growth phase suitable for risk-tolerant investors.

Technically, the stock has been steadily moving within an upward channel this year, recently testing the channel bottom during a pullback. The MACD indicator is expected to generate a golden cross in the short term, with the next upside target around $110.

Oracle (ORCL): Transformer in Cloud Infrastructure

Oracle is shifting from a traditional software licensing company to a cloud infrastructure provider. In fiscal Q3 2024, the company achieved a milestone with cloud infrastructure and software services revenue surpassing software licensing revenue for the first time.

The most notable aspect is the company’s expansion plans. CEO Safra Catz stated that about $10 billion will be invested in data center expansion in the next fiscal year, significantly higher than the $7-7.5 billion in this fiscal year. Chairman Larry Ellison also revealed that the new AI data center in Salt Lake City is large enough to park eight Boeing 747s, demonstrating substantial capital investment by the server concept stock leader.

Benefiting from strong demand for AI cloud services, the company forecasts double-digit growth in fiscal 2025. CEO Safra Catz mentioned that as OCI capacity keeps pace with demand, quarterly growth will accelerate compared to previous quarters. Although the dividend yield is around 1.4%, the stable dividend policy continues to attract institutional investors for long-term holding.

Technically, the stock has risen nearly 80% since 2023, with a gap-up after the June earnings report. Recently, RSI has become overbought and then pulled back. Short-term correction opportunities should be monitored, with support expected around $130.

Digital Realty Trust (DLR): Reliable Income from Data Center Real Estate

Digital Realty is one of the largest data center operators globally, leasing space to enterprises. This business model has a unique advantage: once tenants deploy data centers, migration is difficult, creating high stickiness and long-term stable income.

Compared to the current sluggish commercial real estate market, data center real estate prospects are much brighter. With the continuous growth of AI and cloud computing demand, more traditional real estate or fixed-income investors are expected to shift into this sector. Another positive factor is the Fed’s rate cut cycle, which generally results in higher valuations for REIT assets during declining interest rates.

On the technical side, MACD and DMI have recently shown signs of pullback. Bullish investors may consider establishing positions near the upward trendline at around $140, with the previous high at $154 expected within the year, and potentially rising to $180 or higher over the next two years.

Nvidia (NVDA): Absolute Leader in AI Chips

Nvidia, with its dominant GPU position, is the biggest beneficiary of the AI wave. CEO Jensen Huang predicts the arrival of an era with millions of GPUs in data centers, as every network interaction could be supported by cloud-based generative AI.

To maintain its competitive edge, Nvidia invests heavily in developing the CUDA parallel computing platform, enabling developers to fully utilize GPU computing power. Financial data shows that after the AI boom in 2023, orders surged, with free cash flow skyrocketing from $3.81 billion to $27.02 billion. The last four quarters have seen continuous revenue growth, significantly exceeding expectations.

In the May 2024 earnings release, the company stated that data center revenue grew 427% year-over-year to $22.6 billion, driven by shipments of Hopper architecture H100 GPUs. The upcoming launch of the next-generation AI GPU based on the Blackwell architecture is expected to bring even greater growth momentum.

Technically, the stock experienced two upward waves around the $45 level this year. Currently, technical indicators are weakening, and the market is digesting stock splits and executive sell-offs, which may require several weeks of consolidation. Investors should watch for buying opportunities if the price falls below the 50-day moving average or consider entering after breaking above $140.

Investment Options for Leading Server Concept Stocks

Direct Stock Purchase

Traditional stock investing is most suitable for large-capital long-term holders. Investors can directly buy and hold shares of the aforementioned leading server concept stocks to enjoy long-term capital appreciation and dividend income.

Contract for Difference (CFD) Trading

For traders with smaller capital, CFDs offer more flexibility. This method allows investors to profit from price increases or decreases without owning the actual stocks through contracts. The main advantages include two-way trading and leverage.

With leverage trading, investors only need to deposit a margin to control larger positions, amplifying gains. However, higher leverage also increases risk, so investors should choose appropriate leverage levels based on their risk tolerance.

Other Investment Tools

Besides stocks and CFDs, investors can consider options trading, exchange-traded funds (ETFs), and mutual funds, selecting tools that best match their investment goals and risk preferences.

Future Outlook and Risks for Leading Server Concept Stocks

Moderate Growth Outlook

In Q2 2024, many server concept stocks entered a correction phase, but this mainly reflects a digestion of previous gains. Since global tech giants, startups, and governments continue deploying AI infrastructure, a rebound and new upward wave are expected in Q3.

Clear Long-Term Investment Logic

Over the next five years, industry restructuring and淘汰 are anticipated, with leading companies like Nvidia, Cisco, and rental-focused Digital Realty Trust having higher certainty, making them more suitable for stable, long-term diversification investments.

Key Factors Affecting Stock Prices

The prices of leading server concept stocks are influenced by multiple factors. Market expectations for AI and data processing demand are primary drivers; for example, Nvidia’s earnings per share may grow nearly 100% this year, and maintaining high double-digit growth over the next two years could justify valuations exceeding 200 times P/E.

Changes in industry competition can also impact product pricing and gross margins. Increased competition leading to price declines may pressure profit margins and stock prices of these leading stocks.

Management capability and leadership quality are crucial for long-term stock performance. Excellent management can lead the company to overcome technical bottlenecks, continuously launch innovative products, and generate substantial profits—fundamental reasons why these stocks can achieve hundredfold gains.

Conclusion

With the rapid growth of global AI computing power demand, leading server concept stocks are entering an unprecedented golden period of development. From cloud infrastructure to data center operations, from chip manufacturing to network communications, the entire server ecosystem is expanding rapidly. Investors should closely monitor these five competitive leading stocks and seize long-term growth opportunities amid industry restructuring and淘汰.