January 17, 2025
Invest in Light Speed Data
Dear Subscriber,
 |
| By Michael A. Robinson |
My name is Michael Robinson, and I am a bona fide speed freak.
And no, this has nothing to do with race cars.
Instead, I’m talking about the adrenaline rush from fast web speeds. Because I have a fiber optic connection in my home, I get speeds of up to 1 gigabit, or roughly 7x the U.S. average.
Turns out I’m not the only person with a need for speed.
Tech leaders are racing to get faster speeds to AI-centric data centers. And solutions are already coming into view.
Just recently, a storied Silicon Valley leader introduced a new switch that doubles data center throughput.
To do so, it harnesses the power of silicon photonics.
That’s the process of using light to move data.
Silicon photonics is a relatively new field that has the potential to disrupt the $480 billion cloud computing market.
Let me show you why one savvy leader is on pace to double its earnings in the next two and a half years.
I’ll give you a hint. It just joined the trillion-dollar market-cap club. And with innovation like this, you can see why.
Why Data Speeds Matter
Doubling data center speeds may sound like something that wouldn’t affect most people. But it’s actually central to the modern economy.
Data centers power everything that works through the cloud. Nowadays, that’s practically everything.
We’re talking streaming services, payment processors, email, social media sites, smart phones, appliances, thermostats, mobile apps, cars and more.
You name it, it probably relies on a data center and slows down if there’s a delay in getting a response from the cloud.
And those delays are only going to get more common with billions of connected devices accessing data centers all at the same time.
That’s only intensified since 2019, when the 5G wireless technology began being deployed in earnest.
Compared to the previous 4G standard, 5G is up to 100x faster and cuts down the delay in communicating between handsets and cell towers by a factor of 10 or more.
5G also allows for many more devices to be connected at once.
No wonder, then, that the year the 5G rollout started, mobile data traffic grew at a whopping rate of 68% annually, according to cell tower equipment manufacturer Ericsson (ERIC).
And that’s before 5G further boosts the internet of things, as more and more devices of all kinds start connecting to cloud data centers through 5G wireless.
All this extra data traffic — from all these new devices expecting more data and faster responses — is pushing existing technology to its limits.
An Infrastructure Leader
That’s why I want to introduce you to the company behind this first-to-market fully-integrated photonics networking switch — Broadcom (AVGO).
Headquartered in San Jose, CA, Broadcom designs, develops and supplies a wide range of semiconductor hardware and infrastructure software solutions.
The company operates in more than 30 countries and serves customers in a variety of industries, including data center, enterprise, wireless, automotive, industrial and consumer electronics.
Its portfolio includes a variety of products such as Ethernet controllers, network processors, broadband and wireless communications devices, RF components and fiber optic products.
These products are designed to support data center and enterprise networks, wireless networks, automotive electronics and industrial applications.
Besides semiconductor solutions, Broadcom also provides cybersecurity solutions that include network security and endpoint security software, while its enterprise software offerings include network monitoring and management software, as well as software for the internet of things (IoT).
The firm dates back to the 1960s and has a strong focus on innovation. Its chips and hardware can be found in everything from the largest data centers to smartphones. In fact, Broadcom boasts of over 17,000 patents.
Meet Bailly, the Breakthrough Switch
That’s why the recent introduction of Bailly — a silicon photonics networking switch — is such a groundbreaking achievement for Broadcom and the sector.
Announced a few months back, Bailly is the world’s first fully functional optical switch.
Bailly is a combination of its producer’s existing Tomahawk 5 networking switch — a cutting-edge piece of kit that connects different servers and networks together and routes data between them — with optical connections that use light instead of electricity to send signals.
The combination increases the speed at which the switch can route data to the right destination to 51.2 terabits per second — double that of its predecessor, which used electricity only.
To give you a sense of how fast that is, at those speeds you could download all of Netflix’s library of movies in under 20 seconds.
For the so-called “hyperscale” data centers — meaning the largest ones around, powering the most advanced AI — Broadcom provides the network interfaces.
They are used in servers, the fiber optics to connect them all together, the switches that route that traffic and much more.
Earnings Ramp Up
Using photonics here, the way Broadcom’s Bailly does, has one more advantage over electronics. Not only is it faster … it also draws less power and generates less heat.
For data centers, where the largest cost is often cooling, that’s another plus. No wonder all of Broadcom’s competitors are doing their best to catch up to the firm and its photonic switches.
But Broadcom’s Bailly offering puts the firm months, if not years, ahead.
Right now, Broadcom’s stock trades at roughly $230 a share and has a market cap of $1.1 trillion. So, it’s too big for me to recommend in my other services right now.
But I believe it is a great case study on how to look for stock profits.
Over the past three years, per-share profits have grown at an average of 18%. But in the most recent quarter that figure jumped 50% to 28%.
At that rate, we’d see them double in two and a half years. But if we extend that out to four years to be conservative that’s still a pretty good return on our money.
And as I’ve said before, when earnings double, prices often do, too.
And that makes this tech giant a great cloud and AI investment for the long haul.
Best,
Michael A. Robinson
P.S. But if you don’t want to wait that long for the chance at a double, AI is full of opportunities. Consider the companies Nvidia is bringing along for its crazy ride higher.
Tidak ada komentar:
Posting Komentar