Joseph Moore, senior semiconductor analyst at Morgan Stanley, joins CNBC’s 'The Exchange' to discuss what companies would benefit from AI spending, his take on Nvidia and Broadcom, and more.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Analyst Joseph Moore has identified Nvidia as the primary beneficiary of increased spending in the artificial intelligence sector, citing the company's significant revenue exposure to AI. Moore notes that while concerns about competition and supply chain issues persist, the overall environment for AI hardware remains robust, with strong growth in usage and demand.

Moore also highlights opportunities for other companies such as Broadcom, Marvell, and Micron, particularly in areas like networking and memory. He points out that while expectations for these companies are high, current market enthusiasm may not fully reflect their potential, especially as demand for AI-related hardware and memory continues to grow.

Nvidia will be ‘best beneficiary’ of AI spending, says Joseph Moore

Joseph Moore. Joseph, good to see you. How are you differentiating between what companies are going to benefit in this next leg of AI spend and how much? Well I think everyone's going to benefit. This is a very strong environment and I think for the last six months there's been this laundry list of concerns around Chinese competition. Yeah? Around competition, around issues with Chinese encroachment, hardware issues, product delays and underlying that there's been this very strong growth in tokens that you've seen usage of these AI models as explosive. We need a lot of hardware to support that and we're seeing very strong conditions. I do think Nvidia is the best beneficiary. They have the highest percentage of their revenue from AI but we really see strength across the board and that's why we did raise targets everywhere. We're seeing strength in ASIC investing, strength in AMD, strength in the supply chain to support all of this. It's becoming a little bit consensus. Okay. Because we just heard from the spenders but it is a very strong environment. So where if anywhere is that benefit underappreciated? You got a name like Nvidia which everybody already associates with AI. Arguably sure Broadcom too but there are some of these names like Marvell that are more involved in the guts of the networking of the data center that maybe this is priced in maybe it's not. How are you looking at that? Yeah well I think look the two companies that have the strongest position in processors are Nvidia and Broadcom and I think we all know that. I tend to think that Nvidia is still a little bit underappreciated on a relative basis just how strong their position is but it's very strong for both. I think when you look at the AMD's the Marvell's it's a little bit more of a lower ceiling higher or higher ceiling lower floor. We're all trying to figure out where they sit. Marvell does the processors for Amazon's custom business. I do think there's some opportunity there. Their optical business near term should be very strong and while I'm not maybe as much of a believer in some in in their custom processor strategy I think they're beating and raising here for the next couple of quarters around strong optical and that one that is one that has gone a little bit out of favor as they fell short of high expectations in the first half of the year but you know generally expectations are quite high everywhere and I think those expectations are justified. I don't think I wouldn't characterize any of these as undiscovered but there's different you know degrees of enthusiasm at any point in time and we're looking for the ones where maybe that enthusiasm is lagging a little bit behind as the market is strong for everybody. I think Marvell I think some of the supply chain names like Micron are interesting in that context as well. Yeah when it comes to memory and storage that's necessary to transform and support the data hunger for AI both old data and more recent data are there opportunities there? I think so you know I think when you look at DRAM in particular there's this specialty memory for AI called high bandwidth memory and there's a lot of concern about some of the premiums are eroding there is is it becoming more competitive you know from Micron standpoint which is my company that I cover in that memory space you know they're gaining share and yes it's becoming more competitive but they're in a strong position and because that's a growing portion of their business even if there's a little bit of a narrowing premium they're gonna see margin accretion around all of that so I do you know we're equal weight to stock we've we've got some longer-term cyclical concerns but I think from this short-term very strong surge in AI spending I think people are a little bit under representing their prospects I think it's it's going to be very strong between now and the end of the year

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Nvidia will be ‘best beneficiary’ of AI spending, says Joseph Moore

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Rise of AI