Tests of all the power needed to run AI chatbots back our case for 3 data center plays
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market moves: Stocks were trading higher again, and the S & P 500 was nearing its record close of 6,144 from Feb. 19. The Nasdaq 100 – an index made up of the 100 largest non-financial stocks listed on the Nasdaq stock market – has already hit record highs, powered by the recent surge in stocks tied to AI infrastructure and technology. Club stock Nvidia closed at a record high Wednesday and was on track to do it again. With only days left in June, Nvidia is our best month-to-date performer with a gain of more than 15%. Outside of tech, Club name Goldman Sachs ‘ over 14% monthly gain is a close second. AI power needs: Joanna Stern, technology reporter at The Wall Street Journal, wrote a fun article exploring the energy demands of AI prompts run on large language models like ChatGPT. Her process included visiting an Equinix -run data center in Virginia, which houses a “SuperPod” of Nvidia H100 graphics processing units (GPUs). The story mentions some rough estimates on the watt-hours used to execute a text, image, and video prompt on some models. The main takeaway from the story is that data centers are being built at an accelerated pace to keep up with demand, and those are going to require a lot of energy sources. The power needs aren’t just from running the prompts – technology to keep the temperature of these GPUs cool is another major need. The story does a great job contextualizing why the data center power generation theme has been one of the strongest in the market over the past few years, and we’re playing it in the portfolio through GE Vernova for its gas turbines and grid solutions, Eaton for its electrical power equipment, and Dover as a maker of thermal connectors used for liquid cooling. Private markets: BlackRock ‘s private market solutions are finding their way into retirement portfolios. On Thursday, the company announced it was selected by Great Gray Trust Company to provide an investment strategy across both public and private markets within target-date retirement funds. While the news isn’t entirely surprising, it does offer further validation of CEO Larry Fink’s long-term strategy. As we’ve noted before, BlackRock has made a major push into private markets through a series of multibillion-dollar acquisitions. With investors continually seeking ways to enhance returns, BlackRock believes that incorporating private market solutions into target-date funds could boost annual portfolio performance by 50 basis points over the lifecycle of the fund. That’s a meaningful lift when projected over a 40-year horizon. For BlackRock, private markets also command significantly higher fees than traditional index funds — underscoring the economic appeal of this strategy. Shares of BlackRock have had a strong week to date, gaining more than 5%. The market’s return to its highs may have something to do with it. Higher values in investment accounts translate into more fee income. Up next: Nike reports after Thursday’s close, providing a look into the health of the consumer in both the U.S. and China. There are no major earnings reports on Friday morning. On the data side, before Friday’s opening bell, we’ll get the Fed’s preferred inflation gauge in the personal consumption expenditures (PCE) price index. Later in the morning, it’s the final read on June’s University of Michigan consumer sentiment survey, looking at their feeling about the economy and inflation. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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