4 AI Bottlenecks that Could Create Massive Winners

We have seen this before throughout history. One technical revolution eventually runs into constraints. The railroad boom in the 1800s with steel, coal supply, and financing constraints. Then it was electrification in the early 1900s with constraints being power generation, transmission lines, and copper wiring to name a few. How about the automobile revolution, the internet? We have seen this play out countless times in history. And today we have the AI revolution and it too is running into constraints. The companies that solve those constraints often become the next generation of market leaders. And after listening to the latest earnings reports and looking at where AI spending is headed, I think we're starting to see exactly where the next opportunities could emerge. The first phase of AI investing was pretty simple. It was all about compute and chips. Who could build the fastest AI chips? That's where companies like Nvidia delivered incredible returns. But AI isn't just one product. It's an entire ecosystem. And every part of that ecosystem has to keep pace. If one piece falls behind, the entire system slows down. That's exactly what we're starting to look at today. Let's start with one of the biggest takeaways from the latest earnings results we just heard from Micron. Staggering earnings in the face of high expectation. This is a stock that has increased over 800% in the past 12 months alone. Meaning a $10,000 investment just a year ago is worth over 80 grand today. Here's a look at those latest earnings where EPS came in at $2511 per share, easily topping expectations by nearly $5 per share. Revenues came in at 41.46 billion, which was up nearly 350% year-over-year, easily [snorts] beating analyst expectations by more than $6 billion. Those are huge numbers even in the face of elevated analyst expectations. The message wasn't just that demand remained strong. It was that AI demand continues to exceed supply in critical areas of memory. Companies continue to spend and Micron for example, they don't expect the slowdown until 2028 at the very earliest. One of the most important components inside modern AI systems is high bandwidth memory or HBM. Without enough HBM, even the most advanced AI accelerators can't reach their full potential. That's incredibly important because it tells us something. The bottleneck is no longer AI chips. It's memory right now that allows those chips to perform at the highest level. When companies continue to talk about supply remaining tight despite enormous investment to increase that supply, that tells me that this AI theme still has a long runway of growth. So, with that, you might think we're going to talk more about Micron, but I'm not. We're going to first talk about AMD. And when people discuss AMD, they often focus on GPUs and competing directly with the likes of Nvidia. But what many investors overlook is how dependent AI accelerators are on high performance memory. As HBM capacity expands and the ecosystem matures, AMD is positioned to ship increasingly competitive AI hardware. The opportunity isn't simply building faster chips. It's building complete AI systems capable of handling the larger and more complex models. If memory availability improves over the next several years, that removes one of the major constraints limiting broader AI deployment. In other words, the better the memory ecosystem becomes, the larger AMD's addressable opportunity becomes as well. The memory trade that we just saw with Micron can be a read through to AMD's chip sales moving forward. AMD builds the engine. Micron supplies the high performance fuel system by way of memory, but both are essential. And before we move on to the next bottleneck and stock idea, let me remind you that there's only a few days left in the Seeking Alpha summer sale window. This means 25% off all of their subscriptions. Premium, Alpha Pick, or a bundle of both. All 25% off their normal prices. Premium is what I use to get your full access, in-depth stock research, alerts, portfolio health tools, and factor grades. Then there's also Alpha Pix, which many investors love as it gives you two Strong Buy picks per month, detailed research behind each of those picks with their ratings. Check out my unique URL in the link below to get your 25% discount before the sale ends the first week of July. Seeking Alpha is a tool I have used for over a decade and is a great tool for all investors, especially retail investors like you and me. All right, let's get back to our video and talk about the next bottleneck in the world of AI. None of this works without networking. So right now we have thousands of AI chips all working together. They can't operate in isolation. They need to communicate with one another almost instantaneously. That's where companies like Arista Networks or AET come in. As AI clusters become larger and more powerful, networking becomes missionritical. Every millisecond matters. Every delay reduces efficiency. So, while investors focus on chips, companies enabling ultraast networking may quietly become some of the biggest beneficiaries of this AI buildout, AI isn't just compute. It's compute connected together. And that's exactly what Arista Networks helps makes possible. And when we go back and look at those MU earnings, what that does for AET is validate that the entire AI infrastructure buildout continues. Think about how AI is deployed. A single GPU isn't useful for training frontier AI models. Companies like Microsoft, Amazon, Meta, they don't buy one GPU. They buy 10,000, 50,000, 100,000 plus GPU clusters. This is where Arista enters the picture. Imagine a 100,000 plus GPUs, each processing different parts of an AI model. If those GPUs can't exchange information quickly, extremely quickly, the entire cluster slows down. GPUs begin waiting on data that's incredibly expensive because these are some of the most valuable computing research in the world. Arista builds the ultra high-speed Ethernet networking that connects these massive GPU clusters. The larger the AI clusters become, the more networking becomes missionritical. So the investment chain looks like this. strong micron earnings, continued HBM demand, more AI GPUs deployed, and larger GPU clusters, which means greater demand for high-speed networking, which is where Arista comes in. Micron doesn't create revenue for Arista directly. It confirms that the AI infrastructure cycle is still accelerating, which supports Arista's long-term growth thesis. Right now, analysts have a 12-month price target of $190 per share on shares of Arista Networks, which is roughly a 20% increase from current levels. Now, let's get to another huge bottleneck, which to me could be the largest of all, and that is compute and power. And I think the market is still underestimating this opportunity. Let's assume that memory bottleneck gradually improves over time. Networking continues advancing. What's next? It's going to be power. Every new AI data center consumes enormous amounts of electricity and demand continues growing. Eventually, the limiting factor won't be can we build enough chips. It will be can we actually power all of this infrastructure. That's why I believe that power becomes the next major AI bottleneck. Companies developing reliable on-site power solutions could become incredibly important. And one company I'm watching closely and one that has been incredibly volatile is Bloom Energy. As you can see here on your screen, with the help of Seeking Alpha, the company has a market cap of more than 90 billion and it's up over,00% just in the past 12 months alone, but down double digits percent today. That speaks to their volatility. Now, not a stock I'm buying right now, but one you definitely want to keep on your watch list at a lower price. Bloom Energy isn't a traditional utility. It doesn't own power plants that send electricity across the grid like most electric companies. Instead, Bloom builds solid oxide fuel cell systems that generate electricity directly at a customer's location. Think of it as on-site power generation. Rather than relying on electrical grid, a customer can install Bloom Energy systems and produce electricity exactly where it's needed. That can provide reliable power, lower downtime, greater energy independence, and scalability as electricity demand increases. Now, why is it important for AI? Well, artificial intelligence is creating unprecedented surge in electricity demand. Every new AI data center requires enormous amounts of power. GPUs, networking equipment, cooling system, storage infrastructure. The challenge is that many regions, the electrical grid simply can't keep up with the support of this level of demand. Some new data centers are facing delays just because there's not enough available power. And that's where Bloom Energy becomes interesting. Instead of waiting years for grid upgrades, companies can deploy Bloom's fuel cell systems to generate electricity on site. For AI companies, time is money. If they can get reliable power faster, they can bring AI capacity online sooner. Think about all of the capex dollars that companies like Amazon, Meta, and Alphabet are spending right now. They want to see benefits, efficiency ASAP. Otherwise, investors could be heading for the doors if efficiency is delayed for years. If AI infrastructure continues expanding, having dependable power available exactly where it's needed could become a competitive advantage. Now, on the flip side of that is compute. And one company helping illustrate this trend is Cororeweave. Cororeweave is building AI focused cloud infrastructure at an incredible pace. Its business depends on deploying massive GPU clusters for customers training and running AI models. But building those clusters isn't simply about ordering more GPUs. As we have seen, you need memory, networking, cooling, and enormous amount of electricity. Coreweave represents the broader challenge facing the industry today. As demand accelerates, the companies enabling the infrastructure become just as important as the companies building the chips. So, for those of you unaware, this is where Coreweave weaves into all of this. Imagine you are a startup company building your own LLM or the next chat GPT. You really have two options. Number one, you can spend billions of dollars building your own AI data center, which means buying tens of thousands of GPUs, building the network, installing the cooling, secure enough electricity. Oh, and by the way, hire engineers to manage it all. That would take years and enormous amounts of capital. Option number two, rent that infrastructure from someone who already has it, who already built it out. That's exactly what Cororeweave does. They could be viewed as an AI utility. Cororeweave is a company with a market cap of $55 billion and over the past 12 months, shares are actually down nearly 40%. But like Bloom, Cororeweave is also very volatile. And analysts are bullish on the stock with an average 12-month price target of $143, implying 50% upside from current levels. And if you want to see the exact moment I'm buying any of these stocks, make sure you join my investing community, the Stock Investors Edge, where you can see my trade alerts, get my weekly market report and option trades, and so much more. See the pinned comment down below. When AI first took off, the winners were obvious, the chip companies. Today, the opportunity is becoming much broader. Think about the entire chain again. Compute, memory, networking cooling power infrastructure. Each layer creates new investment opportunities. History shows us that the biggest technological revolutions don't create just one winner. They create ecosystems. And I believe that's exactly what's happening with AI today. If the AI revolution continues unfolding the way many expect, the next generation of winners may not be simply companies designing the most powerful chips. They may be and will be companies solving the industry's biggest bottlenecks. Today, that's memory. Tomorrow it may be power. The investors who understand how these bottlenecks evolve over time may be in the best position to identify tomorrow's market leaders before everyone else catches on. In the comment section below, let me know which of these stocks that we mentioned in today's video would you buy for the long term. Is it AMD, AET, Bloom, Cororeweave, or is it Micron? And if you enjoyed this video, show your appreciation for the content by simply clicking that like button down below. It helps more than you know. Subscribe to the channel so you're notified anytime we drop new content. And also make sure you join my investing community using the link below. Thanks again for watching and we'll see you in the next one. Take [music] care. >> [music]