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The Hidden Opportunity in Nvidia’s Heat Problem

The Hidden Opportunity in Nvidia’s Heat Problem
June 27, 2024

Greetings from the beautiful Henderson Beach Resort in Destin, Florida! As I stand by the serene river that winds through this picturesque location, I’m reminded of how seemingly small changes can lead to significant opportunities in the investment world.

Today, I want to talk about an unintended consequence of Nvidia’s powerful new GPUs and how it’s creating exciting investment opportunities in the semiconductor space.

The Overheating Dilemma

Nvidia’s latest GPU servers, shipped by Super Micro, are generating so much heat that data centers are experiencing shutdowns. This reminds me of when I put a Chevrolet 327 Corvette engine into my Austin Healey 100 back in the ’60s. Sure, I could outrun anyone on Keystone Avenue, but after 30 minutes, the car would overheat and shut down. Why? I changed the engine but forgot about the radiator.

Data centers are facing a similar problem with Nvidia’s chips. They’ve got all this computing power, but without proper cooling, it’s useless. This challenge presents a golden opportunity for investors who can identify the companies working on solutions.

Two Companies to Watch

  1. Navitas Semiconductor (NVTS): They produce Gallium Nitride (GaN) conductors that can significantly reduce heat generation. While the stock is down over 50% year-to-date, their projected earnings paint a different picture:

   – 2024: -16%

   – 2025: +40%

   – 2026: +64%

Their revenue growth is equally impressive:

   – 2024: +19%

   – 2025: +57%

   – 2026: +52%

  1. ACM Research (ACLS): This company specializes in ion implantation, introducing foreign substances to silicon wafers to improve semiconductor efficiency and reduce heat generation.

The Power Problem

It’s not just about heat. These powerful chips are also creating an energy crisis for data centers. I recently heard from Doug, who works at a nuclear power plant in Georgia, about the massive effort to bring new plants online to meet the growing energy demands.

Finding the “Feeder Fish”

While investing in Nvidia is great, the real opportunity lies in finding these “feeder fish” – the companies solving the problems that Nvidia’s success is creating. That’s where my expertise comes in. I identify these companies, analyze their financials and technicals, and determine optimal buy-in prices.

My Cheat Sheet: Your Guide to Smart Investing

I compile all this information into my daily updated “cheat sheet.” This tool not only shows you where to buy in but also projects future stock prices based on earnings growth and historical P/E ratios. It’s a powerful resource for investors looking to capitalize on these hidden opportunities.

In Conclusion

The AI revolution, led by companies like Nvidia, is creating waves of change throughout the tech industry. By identifying and investing in the companies solving the new problems that arise, we can potentially ride these waves to significant returns.

Remember, successful investing isn’t just about following the biggest names – it’s about understanding the ecosystem and finding those critical, often overlooked players that make the whole system work.

Until next time, this is Kerry Grinkmeyer, signing off from the beautiful Gulf Coast. Happy investing!

 

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