AI's Next Phase: Look at Data Center Stocks

Here's how one ETF rates in our system… Published By Money & Markets, LLC. May 10, 2024 Published By Money & Markets, LLC. May 10, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of Chad Stone Managing Editor, [Money & Markets Daily]( AI's Next Phase: Look at Data Center Stocks Money & Markets Daily, I had to bust out the calculator after reading an incredible number. Statista reports we create an estimated 328 million terabytes of data every day. That's the equivalent of texting a small picture of your grandkids or pets 656 million times … every day. With the onset of artificial intelligence (AI), I don't think that number is going down any time soon. Think about it. Do you see yourself texting, browsing or streaming less in the coming years? As much as I'd love to throw my phone in the ocean at times, I know that embracing innovative tech like AI is the smarter move. Because as I mentioned last week, AI is this generation's internet. It's creating incredible early investing opportunities, and I expect that will continue as we find new ways to implement the tech. Getting back to that incredible stat I led off with … data storage is critical for AI. Large language models can process terabytes of information in the blink of an eye — as long as the data is easy to access. That's where data centers come in… --------------------------------------------------------------- [Turn Your Images On]( [AI’s Missing Ingredient: The Key to 10X Profits in 12 Months?]( AI’s growth has been spectacular, but it’s missing a key ingredient ... With it, we could see entire industries disrupted. Without it, the entire city of New York could go black. ([Full story…]( --------------------------------------------------------------- Why Data Centers? Data centers are digital filing cabinets. They securely house all of the world's information and applications for easy access when needed. I won't get too technical here, but the modern data center is a complex network of physical assets (servers, routers, cooling units, power supply units, etc.) and virtual assets in the cloud. Did you fill out a form on your doctor's web portal? That information is now securely stored in a data center. Looked up someone on Facebook? Yup, you guessed it. Facebook's parent company, Meta, has a global network of data centers. Brightlio estimates there are almost 11,000 data centers around the world as of December 2023. And with the onset of AI, we'll need faster and cheaper ways to move information around — which means more data centers. Can you see the investing potential here? Let's see what Adam O'Dell Green Zone Power Ratings says. ETF X-Ray Reveals Data Center Stock to Buy I enlisted the help of Chief Research Analyst Matt Clark to help me find potential data center stocks to follow the AI mega trend. As you may know, exchange-traded funds (ETFs) offer a chance to invest in a broad idea, sector or mega trend without having to be too picky about individual stocks. But as Matt's ETF x-rays have shown in the past, that's sometimes not the best approach. While you get to buy a basket of stocks, some of those assets are going to be a drag on the broader fund's performance. To explore this idea, Matt ran the numbers on the iShares U.S. Digital Infrastructure and Real Estate ETF (NYSE: IDGT), an ETF that tracks American data center and digital infrastructure stocks. Here's how the fund's average ratings look in Adam's system: - Overall — 36 out of 100. - Momentum — 48. - Size — 32. - Volatility — 36. - Value — 29. - Quality — 56. - Growth — 56. With a "Bearish" 36 out of 100 overall average rating, IDGT is expected to underperform the broader market over the next 12 months. Digging into individual stocks within the fund shows us why. Stocks like CCI (8), MRVL (6) and EXTR (6) are dragging IDGT down, while solid ratings on NTAP (84), ATEN (70), QCOM (70) and SMCI (62) means those stocks should offset the laggards. I already touched on SMCI last week, so let's look a little closer at IDGT's highest-rated stock: NetApp Inc. (Nasdaq: NTAP)… [Turn Your Images On] With a "Strong Bullish" 84 out of 100, NTAP is expected to 3X the broader market over the next 12 months. NTAP provides data infrastructure, including software, to manage and store data. It partnered with Nvidia Corp. (Nasdaq: NVDA) to use flash storage to streamline massive amounts of data used in AI and deep learning applications. It’s a fancy way of saying NTAP provides data center power from what looks like nothing more than a large bookshelf. [Turn Your Images On] Source: Nvidia. The stock has gained 69% since May 2023, more than doubling the S&P 500's 26% gain. That's why NTAP boasts a 95 on Adam's Momentum factor. And this company is growing like a weed. In its latest earnings report, NTAP reported $313 million in net income for the quarter ending in January 2024. That's a 381% increase year-over-year! It also grew revenues by 5% year-over-year to $1.6 billion. These are just two metrics contributing to NetApp's impressive 84 Growth rating. If you're looking for a different way to follow the AI mega trend, data centers look promising. But as you can see from this ETF x-ray, it pays to get picky… Of course, accessing, encrypting and delivering all of this information uses massive amounts of power. With the onset of AI, power consumption at data centers is expected to expand at a rapid pace. Newmark, a commercial property consultancy, projects that data centers will consume twice as much power by 2030 because AI tech runs on complex (and power-hungry) graphics processing units. It's creating a "bottleneck" in the AI mega trend, but Adam has identified [one company]( with a solution. [Click here to watch his brand-new AI Power Summit]( and get ready for phase two of the AI revolution. Until next time, Chad Stone Managing Editor, [Money & Markets Daily]( --------------------------------------------------------------- [Turn Your Images On]( [“Titan of Tech” Bets Big on Tiny AI Company]( He’s made as much as 3,250,000% in just three years on companies like Facebook, Airbnb and PayPal… But our research shows his latest investment could be his most successful venture yet. [See how you can invest alongside him]( (with a starting stake of just $25). But you’ll want to do it between now and August 5. --------------------------------------------------------------- [Turn Your Images On] 5,055 Reasons the Economy Is a Concern to Voters Politicians see things differently than the rest of us. Many politicians and pundits insist the economy is great. They point to a low unemployment rate of 3.9%. But that ignores the 5,055 individuals who hold both full-time and part-time jobs. The chart below shows that this is a record high for this category of workers. The number of people holding both full-time and part-time jobs equals 3.1% of the total workforce. These individuals likely don't believe the economy is strong. They're probably working a second job because their full-time job doesn't pay enough. This is an overlooked indicator of the job market, and it tells us there’s trouble in the economy. — Mike Carr, Chief Market Technician, Money & Markets Number of Multiple Job Holders Reaches Record High [Turn Your Images On] [(Click here to view larger image.)]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [THE AI REVOLUTION’S “INVISIBLE” BOTTLENECK]( - [WHAT THE RAILROAD REVOLUTION TEACHES US ABOUT AI]( - [MICROSOFT’S $282,000 AI SECRET]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. 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It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Money & Markets. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 800-684-8471) Remove your email from this list: [Click here to Unsubscribe](