The AI Boom Will Follow This “Script”

Quick, what do you see under the word Amazon in its logo?

For years, I thought it was a smile. But it’s an arrow pointing from A to Z.

As in, Amazon sells everything, from A to Z.

And when a company sells everything, its sales add up.

Last year, Amazon’s sales clocked in at $514 billion. That’s 1 million times the $511,000 it made in 1995, its first year in business.

But before Amazon could make a single sale, other companies poured hundreds of billions of dollars into building the physical infrastructure to make online shopping possible…

Roughly 750,000 miles of fiber-optic cables crisscross between continents on the ocean floor. That’s enough to wrap around Earth more than 30 times.

Add to that land-based cable networks, and you’re looking at millions of miles of cabling.

There are also close to 400 million internet servers – most of them housed in giant data centers.

Think of them as the bartenders of the digital world. They serve up the movies, songs, images, and text that make up the internet.

It’s the reason people called the internet the Information Superhighway back in the early days. It’s the physical infrastructure that makes our digital lives possible.

And the companies that built this highway delivered fortune-making returns.

As I showed folks in my online event last night, we now have another shot to profit as the AI-ready Information Superhighway gets built out.

First, it’s important you grasp the scale of the gains on offer in the late 1990s when the internet boom was underway.

Quadruple-Digit Gains Were the Norm

Take Cisco Systems. It makes internet switches and routers.

These small rectangular boxes with wires poking out of them may seem mundane. But the internet wouldn’t work without them.

They make sure each “packet” of data reaches its destination.

And as Cisco ramped up sales of these devices to help build out the internet, its stock price soared.

Take the period from March 1997 to March 2000 when the boom was in full swing.

Over that time, Cisco returned 1,145%.

It’s just one example of the fortune-making returns during the internet infrastructure investment cycle.

Juniper Networks was founded by two former Cisco engineers.

It also made routers and other network hardware. It delivered a 699% return over that time.

Chipmaker Qualcomm built the computing power for many of these devices and laid the groundwork for the mobile web. It returned 2,050%.

Or take Dell. It’s best known as a PC maker. But it also sold servers and networking equipment. And it returned 1,089%.

I’m 40. I was still a teenager when these internet infrastructure stocks were soaring.

Maybe you missed those gains, too.

But don’t worry… Thanks to the rise of ChatGPT and other AI systems, the Information Superhighway now needs a major expansion.

And another boom is underway.

Even better, we know how it will play out. The script was written in the 1990s.

$1 Trillion AI Hardware Bill

Similar to the build-out of the internet in the 1990s, the AI investing cycle began with spending on hardware.

Amazon, Microsoft, Google, Meta, and other tech firms are expected to spend $250 billion in hardware over the next year.

And as more players join the AI race, spending will ramp up. AI chipmaker Nvidia says the bill will top $1 trillion in the next three years. 

That’s why we’ve seen shares of Nvidia and other AI hardware makers go berserk this year.

Nvidia’s share price has tripled. Super Micro Computer, which makes high-performance server and storage systems for AI training, is up 180% this year.

And Onto Innovation, which sells semiconductor inspection equipment, has rallied 80% year to date.

And these gains mark just the start of the boom.

ChatGPT launched in November 2022. One day, the AI hardware boom will go bust, just like the internet hardware boom. But along the way, nimble investors will be able to capture gains measured in thousands of percent.

I got into all the details of how you should play it in my Nvidia Effect event last night.

I also revealed the strategy I’m using to supersize the profits available on the AI hardware boom we’re in right now.

More than 4,000 folks showed up. So, if you were one of them, thanks for tuning in.

And if you missed it… or didn’t know it was on… you can catch the replay here.

I’ll be back tomorrow with some of the questions I got on the topic of AI… and my responses.

So look out for that in your inbox at the usual time tomorrow.

Regards,

Colin Tedards
Editor, The Bleeding Edge