Investment bank Goldman Sachs recently organized its Communacopia + Technology Conference, an annual event that brings together innovators and business leaders from the technology and communications industries to discuss the latest developments related to their fields and pursue mega deals. Several prominent companies working in the artificial intelligence (AI) space were headliners this year, but none grabbed more attention than Simon Mays-Smith, a senior executive at Autodesk, an engineering firm, who urged investors to pay closer attention to the unsexy AI stuff that companies were pursuing.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
The remarks made by Mays-Smith echo to a certain extent the comments made by Eric Sheridan, a senior research analyst covering the US Internet sector within the research division of the bank, who said on the sidelines of the event that he believed that AI had the potential to be a significant driver of the financial results of tech companies, even though much more was unknown than known right now about the emerging technology. Sheridan noted that historically, tech product cycles underwent periods of capturing imagination, a build cycle, and disillusionment on the time between the build cycle and applications that have utility.
Sheridan highlighted that if you listened to the companies broadly at the conference, the market was moving deeper into the build cycle, which was putting an upward pressure on capital expenditures. He also underlined that for AI, companies needed a lot of capital, a lot of engineering talent, and a lot of data. These created enormous barriers to entry in the AI space. Thus, per the analyst, even some of the most interesting private companies had found their way to partnerships with some of the incumbents just because of the sheer scale of capital, the sheer need for engineering talent, and then the data required to scale these models.
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and AI News You Should Not Have Missed.
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Our Methodology
We selected AI stocks by combing through the proceedings of the latest Communacopia and Technology Conference. We’ve also added the hedge fund sentiment for these stocks, as of Q2 2024.
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10. Lumen Technologies, Inc. (NYSE:LUMN)
Number of Hedge Fund Holders: 18
Lumen Technologies, Inc. (NYSE:LUMN) is a technology and communications firm. Chris Stansbury, the CFO of the company, spoke at the Communacopia and Technology Conference earlier this month, saying that his company viewed the AI TAM opportunity as 3 phases. Per Stansbury, the market was in the first phase right now where the race was for companies that were developing large learning algorithms. He stressed that these firms needed to train those algorithms and there was a race to see who could build the best algorithms the fastest, primarily because in the next phase, larger enterprises would start to use those to run their businesses. He noted that a lot of the connectivity being acquired was really to support the data center builds that were there to support that training.
The senior executive at Lumen Technologies, Inc. (NYSE:LUMN) further underlined that AI needed data, data needed data centers, and data centers needed connectivity, pointing out that this was where his firm excelled. He revealed there was a $7 billion revenue opportunity for his company in the networking domain of data centers, with clients like hyperscalers, large tech firms, and cloud providers.
9. Iron Mountain Incorporated (NYSE:IRM)
Number of Hedge Fund Holders: 24
Iron Mountain Incorporated (NYSE:IRM) is a real estate investment trust that focuses on storage and information management services. Barry Hytinen, the CFO of the firm, spoke at the Communacopia and Technology Conference earlier this month, giving details about the data center business of the company. Hytinen noted that his company was one of the key trusted partners with the largest hyperscalers in the market and had lots of room to grow in this space. He revealed that his firm was operating 265 megawatts of data center capacity, which was 96% to 97% leased, and had under construction another 305 megawatts, which would be complete in phases over the next few quarters. He said his firm was in business with the best credit quality tenants with leases that are 10 years to 15 years in duration.
The senior executive at Iron Mountain Incorporated (NYSE:IRM) further added that the data center business of the firm was growing at 25% or 30% plus compounded, and his firm had the ability to more than double the megawatts it was operating over the next two or three years just by finishing the construction on pipeline projects. He noted that the data center business had a run rate around $600 billion, lending credence to the 30% growth claims.
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