Editor’s note: Today, we have a special guest essay from former hedge fund manager Eric Fry.
According to Eric, there’s one iconic company that could benefit significantly from the AI revolution.
To help investors prepare for the latest AI breakthroughs, he’s sitting down with his colleagues Luke Lango and Louis Navellier for an emergency roundtable discussion.
You can sign up for their briefing tomorrow at 7 a.m. Eastern time by going here now.
Then read on to find out what’s next for the AI revolution…
If we were to play a word-association game, and I said, “artificial intelligence,” you might respond with something like “Nvidia” or “Google.”
Maybe even “robots.”
What you probably wouldn’t say is… “Corning.”
That’s because Corning Inc.’s (GLW) name has been synonymous with best-of-breed glass products.
For more than 170 years, Corning has produced a variety of glass-based marvels, dominating one industry after another. In the 1960s, for example, Corning was producing 100% of the world’s TV screen glass.
In 1970, Corning introduced the world to the company’s most marvelous marvel of all: low-loss fiber optics.
With this groundbreaking invention, thin strands of Corning glass could replace copper wire in telecommunications networks and transmit millions of bits of information per second via photons (pulses of light), rather than electrons.
Thus, the world of optical communications was born… and it has continued to thrive ever since.
However – and back to our word-association game – this iconic glassmaker could benefit significantly from the AI revolution.
So today, I’ll explain why Corning is a surprising, but promising, AI play.
And while I expect Corning to be a winner in the AI revolution, there will also be big losers… all due to an AI breakthrough.
So, I’ll also talk a bit about this AI development, its destructive power, and the step you can take to protect yourself from it.
Let’s dive in…
An AI-Powered Rally
The path from AI to Corning is fairly direct and intuitive.
AI technologies require enormous processing power from data centers. Because this new source of demand is surging, the companies that operate data centers are ramping up their capacity by building new centers and/or boosting the capacity and speed of existing centers.
That means surging demand for the optical fiber and components that Corning produces. Importantly, the growing AI workloads not only require more data centers, but also more fiber optic connections per data center.
According to CEO Wendell Weeks, modern data center systems that rely on Nvidia’s popular Hopper H100 GPUs require 10 times more fiber optics than a conventional data center server rack.
As Weeks explained on CNBC recently, “We’ve invented new fibers, new cables, new connectors, and new custom integrated optical solutions to dramatically reduce installation costs, overall time and space and carbon footprint.”
Therefore, it is easy to see how more data center processing power means “more Corning” – the name of the company’s advancing over-arching strategy.
On average, Corning estimates that data centers running AI large language models will require five times more optical connectivity than they have today.
This year alone, hyperscalers like Google, Amazon, and Meta will invest about $200 billion in data centers, hardware, and other technologies required to deploy generative AI models.
This massive investment caps a multiyear data center construction wave that has doubled the total capacity of hyperscale data centers during the last four years, according to Synergy Research Group.
The Group predicts capacity will double again during the next four years, as 120-130 new hyperscale centers come online each year.
This building boom is finally showing up on Corning’s order books, which is why the company boosted its 2024 revenue and earnings guidance earlier this week, citing “strong adoption of our new optical connectivity products for generative AI.”
Coincident with the data center boom, Corning is seeing trend improvements in its other major end markets, like smartphones. As a result, Weeks believes a $3 billion to $5 billion revenue surge will land on Corning’s income statement over the next three years.
If these expected revenues arrive in a timely manner, Corning could earn as much as $3.00 per share within two years, and $3.50 within three years. At that level of profitability, Corning shares will be trading at 15 times 2026 earnings and just 13 times the 2027 result.
Obviously, this hoped-for revenue surge is not yet in the door. But the trajectory is very promising. And if this revenue does materialize, Corning shares could easily double from the current quote.
In the wake of a favorable Barron’s story about Corning in June, and the company’s subsequent upward earnings revision, the stock is no longer the “secret” AI play it was a couple of months ago.
However, it remains a relatively cheap and underappreciated AI play.
The Next Phase of the AI Revolution
While I favor the unloved Corning, the next phase of the AI revolution will bring a host of new winners… and it’s all thanks to quantum computing.
However, new research shows that thousands of stocks could soon be negatively impacted by quantum computing. Those who aren’t prepared now could be devastated when AI hits warp speed.
So, tomorrow, I will be participating in an urgent AI discussion along with my InvestorPlace colleagues Luke Lango and Louis Navellier. We’ll discuss…
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Why quantum computing is accelerating a destructive force that could wipe out hundreds of stocks and millions of retirement accounts.
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How to safeguard your wealth and even grow it at breakneck speeds as AI revolutionizes everything.
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The unique group of stocks that could go up 10X or more as AI’s new phase disrupts the stock market.
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Why stocks like Nvidia and Microsoft won’t lead the next phase of AI.
If you want to protect yourself, click here to sign up for our AI briefing. It begins at 7 a.m. Eastern time tomorrow.
Regards,
Eric Fry
Editor, Fry’s Investment Report