Investing

This $12 Billion Company Could See Revenues Jump as AI Booms

David Hanson

Published: September 1, 2024 11:48 am

Last Updated: September 3, 2024 4:37 pm

In the video clip below from a recent episode of The AI Investor Podcast from 24/7 Wall St., the team introduces Coherent (NYSE: COHR), a lesser-known company with significant potential in the AI and technology space, particularly in the context of the next big trend: the networking of massive clusters of GPUs.

As the industry moves from central processors to GPUs, the next phase involves clustering these GPUs on a scale never seen before. While a year or two ago, the largest clusters had around 4,000 GPUs, today’s cutting-edge systems, like those from Elon Musk’s companies, are pushing toward 100,000, with plans to scale up to a million GPUs networked together. This massive leap in GPU clustering represents one of the biggest trends in technology, and Coherent is poised to play a crucial role in this transformation.

Coherent, a $12 billion company, specializes in fiber lasers and other equipment, but its standout product in the AI revolution is its transceivers, which are essential for networking and data transmission. As the demand for more powerful transceivers grows, especially those capable of handling 800 gigabits per second, Coherent is well-positioned to capture a significant share of this rapidly expanding market.

The company’s most important product – transceivers – is expected to see the market for next-generation transceivers growing from hundreds of millions in 2021 to nearly $12 billion by 2027, marking a 50-fold growth in just six years. Under the leadership of a new CEO with a strong background in the semiconductor industry, Coherent is streamlining its operations to focus on these high-growth opportunities.

Additionally, Coherent stands to benefit from macroeconomic trends, particularly the anticipated lowering of interest rates. With a reasonable amount of debt, Coherent is well-positioned to gain from a lower interest rate environment, similar to how On Semiconductor thrived under new leadership in the EV market. The potential for Coherent’s stock to multiply several times over the next few years is significant, making it an attractive investment opportunity with a compelling upside, despite its relatively low risk profile.

This highlights Coherent as a company to watch closely, offering investors a chance to get in early on a key player in the next wave of AI-driven technology advancements.

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