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On Wednesday, the stock prices of AI giants such as Nvidia (NVDA.US) plummeted. In the future, Wall Street is still optimistic about the AI ​​boom, but it is focusing on "AI latecomers" such as Intel (INTC.US) and AMD (AMD.US), whose growth has been far less than Nvidia's this year. Compared with popular chip giants such as Nvidia, Micron Technology, and Broadcom, which have risen by more than 60% this year, the stock prices of Intel and AMD, the two major chip giants, appear much weaker.

Melius Research, a well-known Wall Street investment institution, released a report saying that the stock prices of these "latecomers" in the field of AI, such as Intel, AMD, IBM and even Apple, may begin to catch up with the absolute leaders in the field of artificial intelligence such as Nvidia, Microsoft and Google in the second half of this year, leading a new round of "AI investment frenzy."

The latecomers here do not mean that they are lagging behind in the development of AI technology., but rather that they were relatively late in making their moves in a particular field, their market share is far less than that of the industry leaders, or their stock price growth lags behind that of the leaders.For example, Nvidia, the global leader in AI chips, has a market share of nearly 90% in the data center AI chip field, while AMD's share is far less than Nvidia.However, Nvidia's monopoly will undoubtedly face a huge threat from AMD. Although Intel seems to have no share in the data center AI chip market, its participation in the layout of AI PCs with its x86 ecosystem advantages may boost Intel's valuation.

IBM is undoubtedly at a relative disadvantage compared to OpenAI, Microsoft, Google and other leaders in the AI ​​field. However, by deeply deploying the AI ​​developer ecosystem platform and relying on the support of a powerful open source alliance, IBM, one of the "latecomers in AI", is expected to get a share of the huge AI big model market.There is some controversy as to whether Apple is an "AI latecomer". On the one hand, it is one of the "seven major technology giants" and there is a possibility that its stock price has overdrawn expectations. On the other hand, it was indeed very late in laying out its AI big models. However, with its powerful iOS ecosystem, it is expected to achieve "parity" with OpenAI in terms of big model share with the help of AI smartphones.

In the view of fund managers and market strategists from large global asset management institutions such as BlackRock Inc., the world's largest asset management giant, and BNP Paribas Asset Management, a European asset management giant, the unprecedented investment frenzy in global stock markets surrounding artificial intelligence is far from over. A new round of "AI investment frenzy" will continue to drive the "long bull trend" of global stock markets - that is, constantly setting new historical highs.Some economists even predict that additional multiple expansion expectations driven by optimism about the development of AI technology will push the S&P 500, the benchmark U.S. stock index, to a historic peak of 7,000 points in 2025.

Wall Street investment institutions are betting thatAfter an 18-month rally fueled by the last AI frenzy, the “Magnificent 7” may be running out of steam, so they are turning their attention to what Melius Research calls the “latecomers.”

The seven major U.S. tech giants, or “Magnificent 7,” which have a high weight in the S&P 500 index, include Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms. Global investors continued to flock to the seven tech giants throughout 2023 and the first half of 2024, betting that under the wave of global companies investing heavily in generative AI, tech giants such as Apple and Google are in the best position to expand their revenues using artificial intelligence technology due to their huge market size and financial strength.

Melius Research emphasizes that these technology companies, including Intel, AMD, IBM, and even Apple, are fully involved in the field of artificial intelligence, but have failed to catch up with the unparalleled growth of the biggest winners in the field of artificial intelligence, such as Nvidia, in 2023 and the first half of this year.

Over the past month, the stock prices of Intel, AMD and IBM have performed significantly better than those of technology giants, while the stock prices of technology giants such as Nvidia, the leader in artificial intelligence, have declined slightly during the same period.

Intel may be the biggest AI winner in the new round of "AI investment frenzy". Trump's victory has become a basic consensus among most investors, and from the latest news, Trump, who is known as the "King of Understanding", may be more aggressive in trade protectionism policies than when he took office in 2016 and during the Biden administration.It is conceivable that if Trump, who pursues a trade protection policy and is eager to bring high-end manufacturing back to the United States, succeeds in coming to power, the subsidy support for Intel may continue to escalate in the future.

"AI latecomers" are helped by this powerful trend: US stock investment style switching

Crucially, not only are AI latecomers at an advantage in terms of stock price gains, market sentiment, and earnings expectations, they also have a very low bar for performance expectations.This means it will be much easier to beat earnings expectations than for giants such as Nvidia whose stock prices have soared, suggesting they may be in a very advantageous position for the rest of 2024.

The style switch of US stocks will also help the stock prices of these "AI latecomers" to rise.The recent strong performance of small-cap U.S. stocks far outperforms the seven major technology giants.As the expectation of interest rate cut by the Federal Reserve has increased significantly, market funds have begun to turn to companies with great potential for growth other than the seven major technology giants.After all, the valuations of the giants are already very high.In an environment of interest rate cuts, the market favors stocks with cheaper stock prices and a certain level of investment enthusiasm.Intel and other "AI latecomers" are undoubtedly representatives of this category. They not only have the AI ​​label, but also have strong fundamental support.

The index tracking small-cap tech stocks rose 3% on Tuesday, its biggest one-day gain since December, while the large-cap index fell 0.4%. While large-cap stocks have been the decisive factor in outperformance this year, small-cap stocks have been favored over the past month. The small-cap tech index has risen more than 10%, while large-cap stocks have risen just 3.8%.

"We believe that companies in the semiconductor, hardware and software sectors where the market has low expectations will see a 'catch-up' trading trend, where the gains catch up with those industry leaders with high valuations," Melius analyst Ben Reitzes wrote in a recent report. He added that a similar situation also occurred in 2023, when "weak companies" in the first half of the year performed well in the second half of the year.

It is worth noting that Reitz included Apple, one of the seven major technology giants, on the list of "AI laggards." The share price of the consumer electronics giant has been rising steadily since April, especially since Apple demonstrated the long-awaited artificial intelligence capabilities of its smartphones.

The technology sector strategy team from Baird said,Investors are turning to stocks with strong fundamentals but very low earnings expectations, especially those related to AI, which leaves room for imagination for their rise. "AI leaders have doubled over the past year and may face a slowdown in the future," he said. "You don't have to be a rocket scientist to think these stocks are over-held, and those that have been overlooked may continue to be caught up."”

Baird also specifically mentioned other stocks that he believes would benefit from the deal, including software company F5 Inc., electronic measurement instrument company Keysight Technologies Inc., and semiconductor-related companies Diodes Inc., Coherent Corp., Lumentum Holdings Inc. and Aehr Test Systems.

In the first half of this year, large technology stocks such as Nvidia, Microsoft and Google pushed up the entire U.S. stock market, and the valuations of these companies have also reached historical highs, making their gains more difficult in the rest of 2024. Citigroup's strategy team recently recommended that investors implement profit-taking strategies for these technology giants and "rebalance to broader artificial intelligence stocks across the value chain."

Bloomberg Intelligence forecasts show that the profit growth of the seven major technology giants will slow down significantly.Big AI winners like Nvidia and Microsoft trade at large premiums to their long-term price-to-earnings ratios, making laggards like IBM and Intel look cheap by comparison.

If the "King of Understanding" returns, will Intel be the biggest AI winner in the second half of the year?

Investors generally believe that the attack on Trump may become one of the most important turning points in the US election, comprehensively strengthening Trump's image as a political leader. In particular, in the minds of his supporters, he is regarded as one of the historical heroes of the United States, and some media even compare him with Roosevelt. Even in the eyes of some Republican supporters, Trump dodged the bullet under the "protection of God", which means that he is the next president. In contrast, the weaknesses of his opponent from the Democratic Party, the current President Biden, in terms of on-the-spot reaction, speech logic and even party support rate are more prominent.

Polymarket, a platform predicting the 2024 US election, shows that Trump's chances of winning the November election soared by about 10 percentage points to 70% after the shooting, while his rival Biden's chances of winning fell further to 18%.

Therefore, Trump's victory has become a basic consensus among most investors. Judging from the latest news, Trump, who is known as the "King of Understanding", may be more aggressive in his trade protectionism policies than when he came to power in 2016 and during the Biden administration.

It is conceivable that if Trump, who pursues a trade protection policy and is eager for high-end manufacturing to return to the United States, succeeds in coming to power, the subsidy support for Intel will continue to escalate in the future. Perhaps TSMC, the "king of chip foundry", will soon face a truly powerful competitor, which will be Intel.

Judging from Intel's stock price trend in early trading on Wednesday, while the share prices of many chip stocks such as TSMC, ASML and Nvidia plummeted by more than 5%, Intel bucked the trend and soared by more than 6% in early trading!

Perhaps, the market has begun to price in that Intel may become one of the biggest winners after "King of Understanding" comes to power, and Intel, as one of the "AI latecomers", is expected to attract more and more funds in the second half of the year with its cheap stock price, low valuation and AI label. Its stock price rise is expected to lead the entire US chip sector.

Melius pointed out in the research report:AMD and Intel are expected to benefit fully from the AI ​​PC wave. The processor hardware of these two x86 architecture chip giants integrating CPU+NPU+GPU will be used in new AI PC terminal devices equipped with Microsoft Windows operating system.At the same time, Microsoft is about to launch the "Recall" feature in its "Copilot+ PC", and Melius said this may be the closest reason to upgrade brought by a killer application.

In Melius's view, AI PC may be an important catalyst for Intel's continued upward stock price. Intel has been deeply involved in the x86 architecture CPU field on the PC side for decades, and already has a strong software, hardware and supply chain cooperation system and a large loyal user group in the PC field.

Intel's new Core Ultra processor integrates the AI-specific neural processing unit (NPU) and Arc GPU into the CPU, where the NPU is specifically used to accelerate AI reasoning tasks. This central processing unit integrating CPU+NPU+GPU is designed to be the company's "most efficient processor", marking the official arrival of the AI ​​PC era. Intel's Lunar Lake processor for laptops is scheduled to be launched in the second half of 2024. This chip has a "new low-power architecture and significant IPC improvements", and the AI ​​data processing performance of the GPU and NPU modules is three times higher than that of Meteor Lake.

According to the latest forecast data from research firm Canalys,2024 is known as the "first year of AI PC". It is estimated that global AI PC shipments will reach 51 million units in 2024, accounting for 19% of total personal computer (PC) shipments. But this is only the beginning of the market transformation. It is estimated that by 2028, AI PC shipments will reach 208 million units, accounting for more than 70% of total PC shipments by then, and the compound annual growth rate (CAGR) between 2024 and 2028 will reach an astonishing 42%.