Mad Hedge Technology Letter
September 18, 2024
Fiat Lux
Featured Trade:
(ORACLE’S PLAN TO DOMINATE AI)
(ORCL)
Tag Archive for: (ORCL)
Mad Hedge Technology Letter
June 7, 2024
Fiat Lux
Featured Trade:
(HEWLETT PACKARD – REMEMBER THEM?)
(HPE), (SMCI), (NVDA), (ORCL), (DELL)
Artificial intelligence is not always the golden ticket, but some legacy companies, they are using this trend to springboard themselves back to relevancy.
Look at companies like Dell (DELL) or Oracle (ORCL) – they epitomize what I am talking about.
For years, these certain legacy tech firms were crowbarred into this narrow definition of some aging enterprise software company that was from yesteryear.
It was true back then but some have changed.
Hewlett Packard (HPE) is another Silicon Valley brand name that has reinvented itself for artificial intelligence and its stock price has reaped the dividends.
The stock has exploded to the $20 per share range after languishing in the teens for years.
HPE latest report was topped up with its better-than-expected revenue fueled by sales of servers built for artificial intelligence work.
The strong performance was due to the company’s server business, which generated revenue of $3.87 billion.
Sales of AI-oriented systems doubled from the first quarter to more than $900 million.
Increased demand and better availability of high-powered semiconductors from Nvidia (NVDA) led to an increase in AI systems sales.
HPE would be a good way to play the catch-up trade in AI servers compared with its peers in the server space, including Dell Technologies (DELL) and Super Micro Computer (SMCI).
HPE’s current backlog for AI systems is now $3.1 billion.
This is the first quarter HPE has broken out AI server revenue and investors likely welcome the increased disclosure.
The AI-server ramp-up is finally materializing.
The full-year forecast is underwhelming given the increased AI business, suggesting other business lines, such as networking, are dragging down the results.
I am not saying that HPE is the finished article right now and is a pure AI play. I am not. They have a lot to work on and that might be a generous statement to even say that.
There is still plenty to dislike about HPE who are saddled with legacy businesses that barely move the needle.
However, if HPE smartly harnesses resources right, I do believe they could eventually turn into an above-average AI play.
At this point, many tech companies view the participation of AI or not as an existential matter.
Many companies will get left behind and swept into the dustbin of history.
When the biggest tech companies in the world talk about AI constantly on their earnings call, it is not a head fake. This is the real deal so get with the program.
There are many different types of semiconductors with different levels of sophistication, from simple chips in kitchen appliances to cutting-edge graphics processing units (GPUs) used in artificial intelligence (AI) applications, as well as cryptocurrency mining.
In many of these use cases, semiconductor chips will need an AI server to act as storage for the data or some other similar function.
The data produced is substantially greater than analog chips and of higher quality.
We are still in the early innings of the AI revolution, so it is important to know which stocks possess an upward trajectory in terms of business models and sub-sectors.
In 2024, semiconductor chips and AI server stocks have made their stamp in the tech world and aren’t going away.
Remember that the trend is your friend and I wouldn’t fight this one. It’s a massive trend to fight and be on the wrong end.
Moving forward, I believe HPE will make meaningful optimization decisions to amplify its AI server business while minimizing its legacy divisions to the benefit of the future share price.
If they can somewhat achieve these results, the stock should easily rise by 3X.
Mad Hedge Technology Letter
May 31, 2024
Fiat Lux
Featured Trade:
(ANOTHER AI SERVER STOCK)
(DELL), (SMCI), (NVDA), (ORCL)
Nvidia CEO Jensen Huang complimented Dell by saying it’s a “great partnership” at its GTC conference and said that “nobody is better at building end-to-end systems of very large scale for the enterprise than Dell.”
Words like this go a long way in this industry let alone partnering with the best tech firm in the industry.
To have the best CEO in tech flatter your products means staying power but in the short-term, the stock has come too far too fast.
That’s what this deep selloff is about as Dell shares.
The stock is down 19% today but that doesn’t diminish the 207% gain in the past 365 days.
Dell has reinvented itself as an AI stock and specifically a company specializing in servers that serve AI chips.
The company has done so well lately that they are gearing themselves up for inclusion into the S&P index.
That would honestly be a game-changer for the stock.
Super Micro Computer (SMCI), another play on AI servers, was added in March, despite having a market cap below $50 billion.
Confirmation of improving growth prospects could continue to support a stock that’s at a record high while trading at a discount to other tech favorites.
Dell recently generated excitement by unveiling a line of PCs optimized for AI, adding to hopes that such features could prompt a long-awaited upgrade cycle from customers and businesses. HP even reported the first increase in PC sales in two years.
The firm has become a critical cog in the AI ecosystem.
Both the PC and the server businesses will drive growth in coming years, and that’s supportive of both the stock price and the multiple.
I believe we can now say the company has turned itself into both a growth and a value play since the growth story is still under-appreciated and the multiple is very low relative to other AI plays.
The S&P 500 is rebalanced quarterly, with the next scheduled to occur in June. Becoming a component would open Dell up to a fresh avalanche of investors who use the S&P 500 as their benchmark, as well as flows into passive funds that track the index.
All things considered, I believe this is one of the best tech stocks to play server momentum, sky-rocketing storage demand, and an improving PC market.
Dell is becoming an increasingly strategic vendor in AI, but there’s a lot more appreciation for this than there was a few months ago.
Demand for AI systems remains healthy, but other parts of the business remain cyclical, and if we see a macro downturn, even a growth story as powerful as AI could slow down.
I like that investors are looking through the bad PC numbers and only focusing on Dell's AI server story.
This means that readers should be dissuaded from reach for this tech play even though they have a saturated computer business.
The most important and hardest endeavor in the tech industry is to reinvent when business is slowing down.
Only so many firms can pull it off and now that the pivot is into AI, companies are scrambling like Google and Apple in order to stay relevant.
Dell is a stock that should be bought on dips now and I feel funny saying that because that wasn’t the case not too long ago.
Another stock that has reinvented itself with the AI craze has been Oracle (ORCL).
Mad Hedge Technology Letter
November 13, 2023
Fiat Lux
Featured Trade:
(RIDE THE NVIDIA AND AMD ROLLER COASTER)
(NVDA), (AMD), (ORCL), (GOOGL), (AMZN)
It’s scary when the best chip company in the world rolls out new products.
It’s scary because others can’t compete and they get left further behind.
It’s scary because the high level of technology facilitates another new wave of technological expertise in other companies from the software and hardware side.
These new products are almost always faster, more efficient, and better than the previous products catalyzing a snowball effect that lifts everybody’s revenue.
This type of outstanding performance of late is the reason that made Nvidia (NVDA) into the world’s most valuable chipmaker and they have announced they are updating its H100 artificial intelligence processor, adding more capabilities to a product that has fueled its dominance in the AI computing market.
The new model, called the H200, will get the ability to use high-bandwidth memory, or HBM3e, allowing it to better cope with the large data sets needed for developing and implementing AI.
Amazon’s AWS, Alphabet’s Google (GOOGL) Cloud and Oracle’s (ORCL) Cloud Infrastructure have all committed to using the new chip starting next year.
Winning orders is easy with the outsized brand recognition and type of game changing product on offer.
The current version of the Nvidia processor is already experiencing accelerated demand.
But the product is facing stiffer competition: Advanced Micro Devices (AMD) is bringing its rival MI300 chip to market in the fourth quarter, and Intel Corp. claims that its Gaudi 2 model is faster than the H100.
AMD is another chip company that readers should feel comfortable diversifying into if they don’t feel comfortable putting all eggs into the Nvidia basket.
AMD’s stock is surging towards old highs around $125 and should overtake that soon after the nice rally in the 2nd half of the year.
With the new product, Nvidia is trying to keep up with the size of data sets used to create AI models and services.
Adding the enhanced memory capability will make the H200 much faster at bombarding software synthesizing data.
Large computer makers and cloud service providers are expected to start using the H200 in the second quarter of 2024.
Nvidia got its start making graphics cards for gamers, but its powerful processors have now won a following among data center operators.
That division has gone from being a side business to the company’s biggest moneymaker in less than five years.
Nvidia’s graphics chips helped pioneer an approach called parallel computing, where a massive number of relatively simple calculations are handled at the same time.
That’s allowed it win major orders from data center companies, at the expense of traditional processors supplied by Intel.
The growth helped turn Nvidia into the poster child for AI computing earlier this year — and sent its market valuation soaring.
Nvidia is like a freight train that has left the station.
The stock is up 9 straight days as we cruise into its earnings report on November 21st.
It’s hard to see this earnings report being nothing short of spectacular and Nvidia have become famous for forecasting the unthinkable.
They then go and surpass a high bar and push the envelope further so it’s not a bad idea to buy NVDA before the earnings report.
The speed at which they come out with products is astounding and now being able to boast the best server chip in the tech enterprise community, it just represents yet another powerful part of their stunning array of tech arsenal.
$600 per share is a no-brainer for Nvidia and that will be surpassed in 2024.
Mad Hedge Technology Letter
June 30, 2023
Fiat Lux
Featured Trade:
(THE SECOND WAVE OF HOT MONEY IS HERE)
(MU), (SNOW), (ADBE), (ORCL)
Here are four AI stocks that retail traders are going bananas for lately.
These retail participants are itching to get the most exposure to a batch of AI stocks that punch weight just below the tech oligarch level.
Volume remains highly positive as traders fan out to further AI stocks that didn’t benefit as much from the first tranche of hot capital.
If there is anything that could be considered a fat pitch right now in equity markets, then look no further than this collection of 4 rock-solid AI stocks that will make your heart melt.
These four stocks are gaining traction among retail investors as they search for new winners in the AI space.
- Micron (MU)
The semiconductor firm just beat its earnings and revenue targets, raking in $3.75 billion in revenue over the previous quarter.
AI servers have six to eight times the DRAAM content of a regular server and three times the NAND content which translates into elevated demand for Micron’s products.
In fact, some customers are deploying AI computing capability with substantially higher memory content.
The stock has lagged behind larger names like Nvidia and Advanced Micro Devices, but retail net purchases for Micron were 18 times their daily average, even before the company released its latest earnings report.
- Oracle (ORCL)
Oracle's stock has exploded 40% year to date with shares briefly hitting a new record after a stellar earnings report. Total revenue for the 2023 fiscal year hit $50 billion, up 18% from last year.
On Wednesday, the database company also announced new AI capabilities within several of its cloud products, leading more investors to jump in on the stock.
Retail net purchases of the stock were about 145 times the daily average before its latest earnings report.
- Adobe (ADBE)
Adobe was another to benefit from upbeat earnings, with revenue notching a $4.82 billion record in the second quarter, up around 10% from the previous year.
The developer of digital-publishing software also recently unveiled its new platform, Adobe Firefly, a generative artificial intelligence platform for content creators.
Retail net purchases of the stock were about 18 times greater than the daily average prior to its latest earnings report. The stock is up 43% from levels at the start of the year.
- Snowflake (SNOW)
The company recently expanded its partnership with Microsoft and launched a new partnership with Nvidia to implement AI into its data cloud services.
The firm's partnership with NVDA and MSFT to integrate AI tools into their suite of services was welcome by retail traders who are jumping on the stock.
The common theme with these tech companies is solely focused on positive earnings numbers and what that will do is delay the recession that everybody has been waiting for.
The bears have been talking about a recession since the stimulus spike of the lockdowns, but the US economy and corporate tech have refused to believe this false narrative.
The truth is that tech companies still do what they need to do to push earnings higher and in turn deliver higher share prices to their shareholder.
Sure, there is belt-tightening and cost efficiencies taking place, but I view this more through a prism of technology firms becoming hyper-aware of leanness instead of sacrificing quality.
Twitter was correct in laying off 80% of its workforce because that 80% isn’t worth keeping on board for the splashy wage packets they accrue.
Now that we have a second level of tech companies joining the AI bandwagon, this could trigger another leg up for tech shares.
Mad Hedge Technology Letter
June 14, 2023
Fiat Lux
Featured Trade:
(ANOTHER ONE TO ADD TO THE AI BANDWAGON)
(ORCL)
