One AI Stock, One Nuclear Stock

I got two things for you today… let’s start with

Google (NASDAQ: GOOG) and AMD (NYSE: AMD)

Haves and Have-Nots in AI

These are the first two Big Tech/AI stocks to report third-quarter earnings, and the reaction couldn’t be more different. AMD is a chip maker vying for the #2 spot for AI chips, behind Nvidia. AMD also has taken a lot of market share from Intel for data center chips and makes PC/laptop chips.

The stock is crushed today, down nearly 10% or $15 on a pretty decent quarter. Revenue came in a little better than expected, and earnings per share were in line. But fourth-quarter guidance was also just in line with current estimates…

That’s not good enough for investors who want to see anything AI-related grow by leaps and bounds.

We could even try and extrapolate AMD’s guidance out a few quarters and make some projections about the demand for AI chips and even Nvidia. Like, maybe the demand for AI chips isn’t as strong as some people think. Seems logical, except for Google’s results…

Google is one of the hyperscalers, building out its AI infrastructure as fast as it can, and spending around $14 billion every three months to do it. Google posted excellent numbers last night – in particular saying that its AI-powered search results are already improving revenue and earnings.

And this is what investors have been worrying about with regard to the massive CAPEX spending from all of the hyperscalers (Meta, Microsoft, etc.) – when will the billions being spent show up on the bottom line? When will AI get monetized?

Granted it’s a small sample size, but Google is saying it is monetizing “right now.”

The main takeaway is that the hyperscalers are likely to keep spending on AI like there’s no tomorrow. We could also say that AMD’s inability to really ramp up revenue for its best chips might be a company-specific problem (and in fact, AMD did say that there are production delays that are hurting sales).

All this seems really good for Nvidia. If demand is strong and competitor AMD can’t capture it, Nvidia probably is.

Another chip stock that will benefit is Micron Tech (NYSE: MU). Micron memory chips are used by both Nvidia and AMD. Micron should benefit from stable or increasing demand from hyperscalers, regardless.

And the estimates for Micron back this up. Analysts say Micron will finish this fiscal year with $38 billion revenue and $8.89 in per share earnings. Next fiscal year (which starts in March), revenue is expected to grow 20% to $45 billion and earnings to jump 44% to $12.86.

That gives Micron a forward P/E of 8. That’s cheap.

Part Two: The Nuclear Stock Rally is Not Done

We’ve talked about nuclear stocks for the last 6 months. NuScale (NYSE: SMR) at $6, Oklo (NASDAQ: OKLO) at $10, Centrus (NYSE: LEU) at $43, Vistra at $79…

Most of these stocks have at least doubled…and there are likely more gains to come – especially for the Small Modular Reactor stocks like NuScale and Oklo. The stocks are only valued at $2 and $3 billion respectively. I’d expect the valuations to look a lot more egregious if the mania-phase for the nuclear stocks was in full swing…

Plus, only one SMR design has been approved by the Nuclear Regulatory Commission (NRC) – NuScale’s. Yes, NuScale is set to build a working Small Modular Reactor in Ghana. And as I wrote on September 2:

The agreement with Ghana to build one of NuScale’s SMR power plants should be viewed as a test case that will lead to changes in regulations that will pave the way for more widespread deployment.

Point being: there’s still a pretty long runway for these stocks, and you can bet there will be ups and downs.

Speaking of ups, there’s another one to add to your list today: ASP Isotopes (NASDAQ: ASPI). Bill Gates backed SMR company Terrapower has entered into a deal with ASP where Terrapower will finance a uranium enrichment facility that ASP will run and sell enriched uranium to Terrapower.

Interesting note: ASP bills itself as an “isotope enrichment” company. For instance, it enriches yttrium for quantum computing. Yttrium is classified as a rare earth mineral – #39 on the periodic table. Apparently one isotope is as good as another – the deal with Terrapower has ASP Isotopes over 20% today.

ASP market cap is $480 million. Next year’s revenue is expected to be just $32 million. And it will be a couple of years at best before the Terrapower generates any meaningful revenue.

Cheers,

Briton Ryle
Chief Investment Strategist
Outsider Club

X/Twitter: https://twitter.com/BritonRyle

One AI Stock, One Nuclear Stock

Latest Articles