Why Super Micro Computer, Applied Materials, and C3.ai Rallied Today

None of these stocks had company-specific news to speak of today. However, in general, artificial intelligence stocks continued to power higher on solid news flow for AI prospects, which only seems to be getting better and better.

Today’s news included a bullish announcement from the Biden Administration on CHIPS and Science Act subsidies and a breaking news story that OpenAI founder Sam Altman is looking to raise a stunning amount of money for an AI-related chip venture.

$5 billion for chip research, trillions for OpenAI?

On Friday, the Biden Administration announced a $5 billion investment in a public-private research and development consortium for chipmakers. The aim of the consortium, funded by the 2022 bipartisan CHIPS Act, is to accelerate innovation and U.S. workforce development in chipmaking, with an onus on AI chips. In the announcement, Commerce Secretary Gina Raimondo said:

This is an inflection point in the industry … not just because we’re dangerously dependent on one country for so many of our chips, but because AI is going to lead to an explosion of demand for chips, for sophisticated chips, more energy-efficient chips, cost-effective chips.

While it’s hard to determine the direct benefit to any one company, this could be a boon for Applied Materials, which is one of the world’s largest semiconductor equipment providers and the most diversified. Last year, Applied announced a $4 billion multiyear investment in its own R&D research platform, EPIC.

While it’s unclear whether Applied will be directly involved in the government consortium, it’s possible Applied could receive subsidies for some of that spending. It’s also likely that new government-funded research and education centers will buy more Applied Materials equipment for their research labs.

Letters AI on outside of a server box.

In addition to the new CHIPS Act funding announcement, the entire AI ecosystem got a big jolt from last night’s stunning Wall Street Journal report that Sam Altman, the founder and CEO of OpenAI, is seeking $5 trillion to $7 trillion in funding for a massive overhaul of the global semiconductor manufacturing industry.

Yes, you read that right. Trillion.

The project aims to increase the number of AI chips produced globally. As the current leader in the AI space, Altman claims OpenAI’s progress has been hindered by shortages of powerful AI chips needed to accelerate OpenAI’s innovation and growth.

Altman is apparently seeking to change that on his own, which would be quite a massive undertaking for any single company — let alone a “start-up” such as OpenAI! Hence, the massive financial numbers being thrown around, with potential investors including oil-rich governments, such as the United Arab Emirates.

A big increase in the global chipmaking field would probably be a boon again for Applied Materials and also Super Micro Computer, which has carved out a niche as the go-to server platform for AI infrastructure.

It’s unclear how the news would directly affect AI software-maker C3.ai, but it appears the story is boosting most companies having anything to do with the AI ecosystem. That includes even Nvidia, which was up over 3.5% today, even though Altman’s move may be designed to build alternative chips to Nvidia’s dominant graphics processing units (GPUs).

The AI boom may just be starting

While these stocks have had significant moves already, it certainly seems as though they deserve most of the gains last year and this year. AI chips are still in shortage and are becoming table stakes for enterprises and governments worldwide. That’s why we see both industry leaders and governments continuing to invest healthy sums in AI chipmaking, likely to benefit these AI-related stocks.

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Billy Duberstein has positions in Applied Materials and Super Micro Computer and has the following options: short January 2025 $110 puts on Super Micro Computer, short January 2025 $125 puts on Super Micro Computer, short January 2025 $130 puts on Super Micro Computer, short January 2025 $280 calls on Super Micro Computer, and short January 2025 $85 puts on Super Micro Computer. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Applied Materials and Nvidia. The Motley Fool recommends C3.ai and Super Micro Computer. The Motley Fool has a disclosure policy.