Many computer hardware makers are getting big boosts from the proliferation of artificial intelligence. Of course, a huge number of computer chips are needed to create and maintain artificial intelligence (AI). Data centers are playing a huge role in creating and disseminating AI, so many of the leading makers of equipment for data centers are likely to thrive going forward. Also on the AI front, the demand for AI PCs is likely to be strong going forward, creating opportunities for a high number of additional computer hardware makers.
In a different but related area, robots — thanks to AI — appear to be nearly set to finally enter consumer homes on a major scale, creating great opportunities for a large number of computer hardware stocks. Here are the three best companies in the space for investors who want to exploit these strong trends.
Arista Networks (ANET)
As I noted in a previous column, “Arista Networks (NYSE:ANET) sells datacenter hardware, such as switches, routing products and VPNs.” The firm is also poised to gain ground in the $45 billion Ethernet switches market. That’s because Arista’s switches can interface with the most advanced chips more efficiently than Cisco‘s (NASDAQ:CSCO) switches. In 2023, Cisco had a 40% share of the Ethernet switches market versus Arista’s 10% allotment. Arista also offers network equipment that can be used to support AI PCs.
The hardware maker reported very impressive fiscal first-quarter financial results on May 6. They indicate these strong, positive catalysts are significantly boosting Arista’s top and bottom lines. Specifically, earnings per share (EPS) soared 39% to $1.99 compared to the year earlier. Sales also advanced 16% year-over-year to $1.57 billion. Analysts, on average, had only expected the firm to generate EPS of $1.74. Also encouragingly, the firm announced a new $1.2 billion stock repurchase plan.
In recent weeks, ANET stock enjoyed strong momentum as the shares jumped 28% between Apr. 22 and May 29.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) specializes in making servers that work in conjunction with the products of all of the leading makers of AI chips, including Nvidia (NASDAQ:NVDA), AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC).
Multiple major Wall Street banks have been very bullish on SMCI stock recently. Bank of America noted Nvidia said many consumer-facing companies and other types of firms were embracing AI for the first time. The bank expects Super Micro to significantly benefit from this strong trend. Bank of America also noted Super Micro already has footholds with companies in multiple sectors, including “financial services, drug discovery and autonomous vehicles.” And Super Micro is holding talks with governments about supporting their forays into AI. Bank of America maintained its “buy” rating and its $1,090 price target on SMCI stock.
After speaking with Super Micro’s CFO, JPMorgan said the tech firm has a “strong (and record) backlog.” The bank expects the company to benefit from price hikes and increased revenue as it upgrades its servers.
Rockwell Automation (ROK)
Industrial automation firm Rockwell Automation (NYSE:ROK) develops “integrated robot solutions” and specializes in providing industrial robots. Already becoming a huge business, industrial robots are slated to become much more popular in the medium-to-long term amid continued AI advancements.
A record total of over 44,300 robots were shipped to American manufacturers last year. In addition to AI improvements, labor shortages and higher speed and efficiency requirements will drive higher adoption of robots in the longer term, Association for Advancing Automation president Jeff Burnstein told Investor’s Business Daily.
In September 2023, Rockwell acquired Canada-based Clearpath Robotics, which Rockwell described as “a leader in autonomous robotics for industrial applications.” The deal should help Rockwell meet the increasing demand for high-speed robots in the manufacturing sector.
And Rockwell could even eventually branch out to providing robots for consumer homes. According to Ken Goldberg, a robotics professor at the University of California, Berkeley, technology is getting advanced and cheap enough that robots will soon become useful additions to homes. Indeed, Tesla is considering selling its robot, Optimus, to consumers at the end of 2025.
On the date of publication, Larry Ramer held long positions in SMCI, ANET and INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
