Picking Winners in the AI Gold Rush

Shah Gilani|May 3, 2024

In the mid-19th century, the California Gold Rush lured thousands of hopeful prospectors to the American West, each dreaming of striking it rich.

As the adventurers flooded into the region, they quickly realized that success required more than just determination and luck. They needed tools – picks, shovels, pans and other equipment – to extract the precious metal from the earth.

Enterprising merchants soon recognized the opportunity and began supplying the prospectors with the necessary tools and provisions. These merchants, known as “pick and shovel” sellers, often found more reliable and greater profits than the miners themselves.

Today, the semiconductor industry is experiencing its own sort of gold rush thanks to AI.

Companies like Nvidia, AMD and Broadcom are designing cutting-edge chips that promise to revolutionize computing and power AI applications.

However, just as in the California Gold Rush, the success of these semiconductor “pioneers” depends on a network of “pick and shovel” companies that provide the essential tools, materials, and services needed to bring their chips to life.

From wafer fabrication equipment and specialty chemicals to testing and packaging services, these lesser known companies have a crucial role in the growth of AI.

I’m talking about companies like…

• Lam Research (LRCX), a supplier of wafer fabrication equipment and services
• ASML Holding (ASML), the leader in photolithography equipment, a crucial tool for etching circuits onto silicon wafers
• Cabot Microelectronics, recently bought by Entegris, a provider of chemical mechanical planarization (CMP) slurries and pads, used to fabricate of integrated circuits
• Applied Materials (AMAT), a leading maker of the sophisticated machinery used to manufacture semiconductor chips. It provides equipment, services, and software for chip-making.

Not to mention the many companies that are involved with…

• Designing, building and operating testing equipment that ensure chip quality and performance
• Assembly and packaging in the later stages of semiconductor production, including wafer processing, assembly, and packaging chips

These “pick and shovel” plays are lesser-known ways to capitalize on the growth of the semiconductor industry… their products are in high demand

And much like the hopeful prospectors of the gold rush… the industry can’t survive without them.

But when it comes to AI… there’s one small company that isn’t just a “pick and shovel” play… it’s a make-or-break, backbone-strengthening, industry-changing player.

Nvidia recently introduced its advanced Blackwell chips, designed to push the boundaries of AI capabilities. These chips are the fastest and most powerful chips on the market.

But Nvidia needs this one small company – what I’m calling “Nvidia’s Secret Partner” – in order to make the chips work for AI. The tech this company produces doubles data transfer rates… cuts energy usage in half… and can clean and amplify signals, increasing the reach of connections over long distances.

All critical for AI’s success.

Beyond just enhancing performance, this tiny company also aids in the broader adoption of AI technologies.

Industries such as healthcare, automotive and finance are increasingly relying on AI to drive innovation and efficiency.

The reliability and speed of the hardware provided by companies like Nvidia and enhanced by this “pick and shovel” company are pivotal in making AI applications more viable and widespread in these critical sectors.

It’s a critical component that the industry can’t advance without.

And the best part? This company is the same size Nvidia was nearly a decade ago… right before its monumental ascent.

It’s my No. 1 “pick and shovel” play for the AI revolution as it goes mainstream.

Get all the details on the company here.