2024 US Stock AI Server Concept Stock Leaders Overview, this wave of computing power revolution cannot be missed

As generative AI technology advances rapidly, global computing power demand is experiencing explosive growth. In the US stock market, server concept stocks leading the sector are becoming hotly pursued by capital. This article systematically reviews several of the most valuable AI server leading companies and analyzes their investment prospects from multiple angles.

New Opportunities in the Server Industry Driven by the AI Wave

Three key factors driving the performance of server concept sector leaders

Surge in Computing Power Demand

The emergence of ChatGPT has completely changed the development pace of the tech industry. According to Huawei GIV’s latest forecast, by 2030, global intelligent computing power will reach 52.5 ZFLOPS, meaning that the compound annual growth rate of future demand over the next nine years will be as high as 82.65%. This exponential growth presents unprecedented challenges to servers and data centers and creates huge market space for server sector leaders.

Accelerated Data Center Expansion

Global tech giants are launching new data center construction plans. Such infrastructure not only supports cloud computing services but also becomes a necessary condition for deploying large-scale AI models. From data storage to real-time computing, the demand for products and services from server sector leaders continues to rise.

Expansion of the Internet of Things Ecosystem

The number of IoT devices is growing geometrically, with each connection generating massive data, thereby driving the demand for data processing capabilities. This builds a long-term growth engine for server sector leaders.

Definition of Servers and Leading Companies in the Server Concept Sector

Servers are the core of modern digital infrastructure, responsible for storing, processing, distributing data, and providing computing services. A single server can serve hundreds or thousands of users simultaneously, forming the backbone of data centers, cloud platforms, and network applications.

Leading companies in the server concept sector refer to publicly listed enterprises that dominate fields such as server hardware manufacturing, data center operation, and cloud computing services. These companies not only provide core equipment but also form a complete ecosystem through software, services, and solutions, thus exhibiting stronger cyclicality resistance and growth resilience.

Top 5 Server Concept Sector Leaders to Watch in 2024

Cisco Systems (CSCO) — Absolute leader in network infrastructure

Founded in 1984, Cisco holds over 40% market share in the global enterprise network market. As a leader in communications infrastructure, the company’s business covers Internet Protocol, network products, and security solutions.

Core Competitiveness: In 2023, Cisco significantly expanded its product line through acquisitions, acquiring nine companies and announcing the acquisition of Splunk, building a software-driven cybersecurity ecosystem. In the first half of this year, Cisco jointly launched the Cisco Nexus HyperFabric AI clusters with Nvidia, integrating servers, storage, networking, and AI software into one, becoming the first data center product line supporting cloud management.

Financial Performance: Over the past seven years, Cisco’s revenue has maintained stable growth, generally exceeding market expectations. Institutional investors are optimistic about the company’s steady dividend policy and robust growth outlook. If the collaboration with Nvidia exceeds expectations and contributes significantly to revenue, it will be a strong catalyst for stock price appreciation.

Technical Highlights: The daily chart shows recent golden cross signals in DMI and MACD, indicating gradually accumulating upward momentum.

Vertiv Holdings (VRT) — High-growth hidden champion

Vertiv is a leading global provider of digital infrastructure technology, headquartered in Ohio, with operations in over 130 countries. It specializes in designing and manufacturing critical infrastructure for data centers, communication networks, and industrial applications.

Driving Forces of Rapid Growth: In 2023, EPS grew by 233% year-over-year, an astonishing rate mainly driven by significant improvement in gross margin. Market forecasts suggest EPS still has over 30% growth potential in 2024. The upgrade of credit ratings — Moody’s and S&P raised ratings to Ba3 and BB respectively at the end of 2023 — further confirms operational improvements.

Investment Characteristics: As a growth stock in expansion, Vertiv has recently increased dividends but with a dividend yield below 0.1%. Such companies are more suitable for investors with higher risk tolerance.

Technical Pattern: The stock price has been in an upward channel throughout the year, recently pulling back to the lower boundary of the channel. The MACD indicator may form a golden cross in the short term, presenting a buying opportunity with a target near the $110 mark.

Oracle (ORCL) — Traditional IT leader’s AI transformation

As a veteran leader in the tech industry, Oracle has actively expanded its data center business in recent years. In Q3 of fiscal year 2024, revenue from cloud infrastructure and software services surpassed traditional software licensing revenue for the first time, marking a significant milestone in the company’s strategic transformation.

Clear Capital Investment Direction: CEO Safra Catz announced that about $10 billion will be invested in data center expansion in the next fiscal year, a substantial increase from the $7-7.5 billion in this fiscal year. Chairman Larry Ellison revealed that the Salt Lake City AI data center alone is large enough to park eight Boeing 747 aircraft, demonstrating strategic determination.

Growth Certainty: Despite occasional performance fluctuations, overall revenue and EPS show steady growth. Benefiting from strong demand for AI cloud services, the company forecasts double-digit revenue growth in FY2025, with the CEO stating that as OCI capacity gradually catches up with demand, subsequent quarters will see accelerated growth.

Stable Cash Returns: Although the dividend yield is about 1.4%, the increasing dividend policy continues to attract institutional and long-term investors.

Technical Signals: Since 2023, the stock price has risen nearly 80%, with a gap-up after the June earnings report. After RSI became overbought and then retreated, investors can watch for short-term correction opportunities, with support above the previous consolidation zone at $130.

Digital Realty Trust (DLR) — Long-term income machine in data center real estate

Digital Realty is one of the world’s largest data center operators, generating income by leasing facility space and entire data center shells to enterprises. Compared to declining commercial real estate, data center real estate prospects are much brighter.

Long-term Lease Stickiness Advantage: Once enterprises deploy data centers, migration costs are extremely high, giving tenants strong stickiness. The continuous growth in industry demand and low tenant churn rate support the long-term income of such assets.

Favorable Interest Rate Environment: In the context of global central banks entering a rate-cutting cycle, REIT valuations are generally enhanced. This is a major positive for high-quality data center REITs like Digital Realty.

Technical Analysis: MACD and DMI recently showed a pullback signal. Optimistic investors may consider deploying around $140 near the upward trendline, with the first target at the previous high of $154, and potentially aiming for $180 or higher in the next two years.

Nvidia (NVDA) — Absolute leader in AI chips

Nvidia is the undisputed leader in the global GPU and AI chip markets, with a market share far ahead. CEO Jensen Huang predicts the arrival of an era with millions of GPU data centers, as every interaction between humans and the internet may involve cloud-based generative AI.

Deep Technical Moat: The company’s self-developed CUDA parallel computing platform has become an industry standard. With CUDA, developers can fully leverage GPU computing power, greatly accelerating application performance. This creates an ecosystem lock-in that is difficult to shake.

Impressive Financial Data: After the AI wave exploded in 2023, orders surged, with free cash flow skyrocketing from $3.81 billion to $27.02 billion. Earnings have exceeded expectations for four consecutive quarters. The May earnings report showed data center revenue grew by 427% year-over-year to $22.6 billion, mainly driven by large shipments of Hopper architecture GPUs (including H100). The upcoming Blackwell GPU is expected to bring a new wave of growth.

Technical Signals: The stock experienced two upward waves at the $45 level this year. Currently, technical indicators are weakening, and combined with market digestion of stock splits and executive share reductions, a similar end to the first wave of rally may occur — requiring several weeks of consolidation. Investors may consider buying when the price falls below the 50-day moving average or chase after a breakout above $140.

Investment Approaches for Leading Server Concept Stocks

There are multiple ways to invest in these leading companies.

Direct Stock Investment: Suitable for long-term holders, can be purchased directly through various brokers in US stocks.

CFD Trading: A common method for Taiwanese investors, with two main advantages. First, profit from price movements without owning actual stocks; second, support for leverage trading, allowing control of large positions with small capital. However, leverage amplifies risk, so careful risk assessment is necessary.

Mitrade, a CFD broker headquartered in Australia and strictly regulated by ASIC and CIMA, provides safe and convenient online trading services for Taiwanese investors. The platform supports NTD deposits and withdrawals, with a trading threshold of only $50, and allows trading of stocks, forex, gold, oil, Bitcoin, and hundreds of other assets in one account.

Other Options: Options trading, ETFs, mutual funds, and other investment vehicles also offer diversified participation.

Mid-term Outlook for Leading Server Concept Stocks

Correction and Rebound Cycles

After the broad rise driven by the 2023 AI wave, leading server stocks entered a correction phase in Q2 2024. However, considering that tech giants, startups, and countries worldwide are vying to enhance computing power, a rebound and restart of the upward cycle are expected in Q3.

Trend Toward Concentration of Leaders

In the next five years, industry restructuring is expected, with a growing differentiation between leading companies and small- and medium-sized firms. Tech leaders like Nvidia and Cisco, as well as stable income REITs like Digital Realty, have higher certainty and are more suitable for conservative investors seeking long-term diversified allocations.

Core Factors Influencing the Prices of Leading Server Concept Stocks

Market Demand and Industry Trends

The development paths of data processing demand, artificial intelligence, and IoT directly impact valuation. For example, when the market expects Nvidia’s EPS to grow close to 100% and maintain high double-digit growth over the next two years, institutional investors are willing to assign a PE ratio exceeding 200.

Evolution of Competitive Landscape

Industry competition intensity affects product pricing. Fierce competition forces companies to lower prices, eroding gross margins and EPS. Significant profit declines often trigger deep stock price adjustments.

Company Operational Capability and Leadership

Beyond macro industry factors, investors focus more on a company’s profitability and strategic execution. Historically, outstanding leadership (like Apple in the Steve Jobs era or Tesla under Elon Musk) has driven disruptive products through technological breakthroughs and innovation, generating huge profits and enabling stock price increases of hundreds of times. Whether server sector leaders can sustain innovation will determine their long-term investment value.

Overall Evaluation

The rapid growth in AI computing power demand opens vast market opportunities for server sector leaders. Sub-sectors such as power management, cooling systems, data center real estate (REITs), and traditional data center construction will take turns as market hotspots in different cycles. Therefore, investors should maintain long-term focus on these leaders and adjust their allocation strategies according to market rhythm. Against the backdrop of ongoing AI development, the investment prospects of server concept sector leaders remain promising.