Just before NVIDIA earnings! Check out 2 "hidden AI" stocks! Dominating in the niche field of datacenters

Key events that could mark a turning point in the marketis approaching moment by moment.NVIDIA's earnings announcement on August 28thThat.

On the other hand, apart from NVIDIA, the earnings of companies in the SOX index components are almost complete. From the earnings of these companies,the benefits of the AI investment boom are further expanding.It has been indicated that AI data centers are not created by NVIDIA alone, but involve many companies from memory and module IP licensing to semiconductor manufacturing, encapsulation testing, electrical utilities solutions, data communications transceivers, etc. When compared to the earnings announcements of the previous quarter, companies in these fields are also showing momentum for AI stocks that may surpass NVIDIA.After summarizing the earnings of the SOX index and its components, I have been doing it.

This time,SOX index and its component earnings,followed by.Check the performance trends and outlook for the two 'hidden AI' stocks.Said.

Semiconductor stocks, overall performance for this quarter is generally solid.
Out of the 30 constituent stocks of the Philadelphia Semiconductor Index (SOX Index), 26 stocks have reported earnings. From the earnings of these stocks, it was indicated that while performance recovery in traditional fields of the semiconductor industry is somewhat gradual, the AI-related sector continues to show relatively high growth.

Regarding the overall SOX Index,reflecting the performance outlook based on the earnings of the 26 stocks that have announced results, the outlook is as follows. This quarter, EPS (earnings per share) is expected to grow slightly, but the growth is expected to accelerate in the following quarter (NVIDIA's earnings are pending, so there may be revisions in the future).

Individual stocksIn this case, the surprise rate of adjusted EPS compared to market expectations (hereinafter referred to as performance surprise) is as follows. Generally, there were many stocks with positive performance surprises.

On the other hand, when checking the stock price trends after earnings reports, it is not always the case that stocks with significantly higher earnings surprises are heavily bought. The performance details, including not only this quarter but also future prospects, seem to be more important. The most easily reflected factor is the change in evaluations by analysts. Typically, analysts covering a company will thoroughly examine the earnings results and then reset the target stock price for the next 12 months based on the mid- to long-term outlook. Many analysts tend to raise the target stock price if the performance outlook becomes more positive.

Stocks with a high upward revision rate of target stock prices
After earnings announcements, the change rate in the average target stock price by analysts is as follows:

When comparing the table of target stock price change rates with the table of earnings surprises, the sequence of stocks has changed. This is because future prospects have been taken into account. However, for Intel, which is struggling with restructuring, the target stock price was downwardly revised in proportion to a significant underperformance in earnings.

Among these brands are Stocks that have surpassed NVIDIA in the rate of stock price increase in the second half of the year.are plentiful. For example,Monolithic Power SystemsやCoherent、Texas InstrumentsIt is believed that the increase in stock price reflects the performance outlook and target stock price upgrades by analysts.

Considering the market environment where the SOX index has fallen by 7% in the second half of the year so far (as of August 22), the potential upside reversal of these stocks (approximately 5%-10% increase) is worth noting. Check the performance trends and outlook of the 2 stocks that significantly contributed to the growth in the AI-related sector.

Performance trends
・They have been experiencing solid revenue growth. As indicated in the company materials below, they have achieved positive growth even during the industry's downturn.

・In the April-June quarter, revenue was $0.507 billion, exceeding both the upper limit of the company's guidance and the market's expectation of $0.491 billion. The significant revenue increase was due to 1) increased demand for AI power solutions, 2) improved orders in several end markets, 3) initial revenue growth from design projects acquired over the past few years.

・By segment, the mainstay Storage & Computing, Automotive, and Enterprise Data segments are all experiencing revenue growth. The management believes that in the Enterprise segment, their business opportunities are significant due to the emergence of AI processors requiring high current. During the earnings call on August 1st, they commented, "Although design wins from companies like Google, AWS, Meta, etc., have not grown significantly, they will in the future. We believe there are significant opportunities for us." At the same time, they emphasized that they do not want to be just an AI company and have many business opportunities in other fields as well.

・Supported by the strength of the main business segments, future performance expansion is expected to continue.

Changes in target stock prices after the earnings report
After the earnings announcement on August 1st, several analysts raised their target stock prices.

Performance trends
・Sales revenue for the April-June quarter was $1.31 billion, a 9% increase compared to the January-March quarter, adjusted EPS was $0.61, up 49% year-on-year, exceeding market expectations. The robust growth mainly came from data communication transceivers for AI data centers, driving performance. Guidance for the July-September quarter is sales revenue of $1.27 billion to $1.35 billion, adjusted EPS of $0.53 to $0.69, both slightly below market expectations at the median.

・During the earnings call, the management stated that "Demand for AI-related data communication remains robust," explaining that orders and order backlog for 800G data communication transceivers are increasing now and in the future. It was also mentioned that over the next several quarters, robust growth is expected in the data communication business.

・The company expects the expansion of the datacom market to accelerate in the future. The company views it as a significant business opportunity, as illustrated in the earnings call materials below (August 15). The 800G data communication transceiver, which is expected to have the greatest growth potential, has become a major growth engine for the company. A future increase to 1.6T is also anticipated. Currently, they are ramping up production for 800G, with plans to provide samples for 1.6T in the coming months. It is expected that mass production of 1.6T can be achieved next year.

Changes in target stock prices after the earnings report
After the earnings report, one analyst lowered the target stock price, while several analysts raised their target stock prices.