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We’ve been bombarded with Black Friday deals for weeks now. What used to be a one-day-only, in-store event has turned into a month-long celebration of “the best deals of the year.”
So, in the spirit of the week, I’d like to share a relatively cheap and underappreciated AI play that I’ve been watching throughout 2024.
Let’s take a look…
If we were to play a word-association game and I said, “Artificial intelligence,” you might respond with something like “Nvidia,” or “Google,” or maybe “robots.” You probably would not say “Corning.”
But as it turns out, this iconic glassmaker could benefit significantly from the AI boom, as a classic “pick and shovel” play.
For more than 170 years, the Corning Inc. (GLW) name has been synonymous with best-of-breed glass products. It has continuously innovated and set the industry standard for excellence.
Now, the path from AI to Corning is fairly direct and intuitive. AI technologies require enormous processing power from data centers. Because this new source of demand is surging, the companies that operate these “hyperscale” data centers are ramping up their capacity by building new centers and/or boosting the capacity and speed of existing centers.
That means surging demand for the optical fiber and components that Corning produces. Importantly, the growing AI workloads not only require more data centers, but also more fiber optic connections per data center.
According to Corning CEO Wendell Weeks, modern data center systems that rely on Nvidia Corp.’s (NVDA) popular Hopper H100 GPUs require 10 times more fiber optics than a conventional data center server rack.
As Weeks explained on CNBC, “We’ve invented new fibers, new cables, new connectors, and new custom integrated optical solutions to dramatically reduce installation costs, overall time and space, and carbon footprint.”
Therefore, it is easy to see how more data center processing power means “more Corning.” On average, Corning estimates that data centers running AI large language models (LLMs) will require five times more optical connectivity than they have today.
In 2024 alone, these hyperscalers – like Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and Meta Platforms Inc. (META) – invested about $200 billion in data centers, hardware, and other technologies required to deploy generative AI models.
This massive investment caps a multiyear construction wave that has doubled the total capacity of hyperscale data centers during the last several years, according to Synergy Research Group. Synergy predicts capacity will double again during the next few years, as 120 to 130 new hyperscale centers come online each year.
This building boom is finally showing up on Corning’s order books, with the company citing “strong adoption of our new optical connectivity products for Generative AI.”
Coincident with the data center boom, Corning is seeing trend improvements in its other major end markets, like smartphones. As a result, Weeks believes a $3 billion to $5 billion revenue surge will land on Corning’s income statement over the next two years.
If these expected sales arrive in a timely manner, Corning could earn as much as $3 per share within one year, and $3.50 within two years. At that level of profitability, Corning shares will be trading for 15 times 2026 earnings and just 13 times the 2027 result.
Obviously, this hoped-for revenue surge is not yet in the door. But the trajectory is very promising. If/as/when this revenue does materialize, Corning shares could easily double from the current quote.
So, as tech darlings like Nvidia and Amazon continue to prosper, I would favor the unloved Corning for the next phase of the AI boom.
Now, let’s look at what we covered here at Smart Money this past week…
Smart Money Roundup
Use This Tool to Get Light-Years Ahead of Other Investors
In trading, it’s critical to have a fundamental idea of how the market is performing to help shape our positions. By looking over recent history, we begin to see patterns of behavior we can use to our advantage. Jonathan Rose explains how his systematic approach can act as our investing “Line in the Sand.”
How to Beat the Market… Even if You’re Bad at Math
Traders can take advantage of market makers’ ignorance… if they know how options work. So, let’s take a look at that. Plus, I’ll show you a specific trade opportunity that smart investors might want to investigate further right now. Click here to learn more.
These 24-Hour Stock Plays Aren’t on Anyone’s Radar
Seasonality trends and historical data can help guide your investments, especially in the long term. But there’s more to the market than its past performance. You can’t ignore what’s happening in front of you in the short term, even if the data says otherwise.
Jonathan Rose will show you how to harness extremely short-term options to trade just like institutional investors – all while limiting your exposure to risk and maximizing your potential for gains.
My 5 Tips to Set Your Portfolio Up for the Long Haul
To start the Thanksgiving holiday off early, my InvestorPlace colleague Louis Navellier shares his five tips that you can use to set your portfolio up for success in over the coming months. Continue reading here.
Looking Ahead
Speaking of Black Friday sales, a one-day trade is coming this Black Friday…
The idea of putting on a trade in the morning and closing it out that same day, knowing you could double your money or lose most of it, may either delight or terrify you.
For those in the latter camp, here is why you’ll want to open your mind to the idea of very short-term trading…
Volatility is a new fact of life. Companies are doubling in market cap at a faster rate than ever before. And 24/7 access to trading platforms is encouraging more impulsive decision-making.
What you need to understand is that when you learn to harness the power of volatility, this becomes a wonderful thing.
Jonathan Rose, former CBOE floor trader and market maker, can tell you all about that. He doesn’t try to guess the direction of stocks over a 24-hour period. Rather, he looks for unique setups that pay out if volatility rises. That’s a much easier thing to forecast.
That’s what his One-Day Winners Live Summit – tomorrow, Tuesday, November 26, at 11 a.m. Eastern time –is all about. You can click here to sign up.
Jonathan will tell you everything you need to know to prep for this week’s big trade on Black Friday, from the perspective of a trading veteran with decades of experience.
To sign up for this event, click here.
Regards,
Eric Fry, Smart Money
