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Hewlett Packard Enterprise Co. (NYSE: HPE) stunned Wall Street on May 17 with important merger news.
That's when the company announced it was joining forces with another historic computing firm.
See, HPE is a spin-off of the storied Hewlett Packard, one of Silicon Valley's early computing pioneers. It said last Friday it is buying supercomputing legend Cray for about $1.4 billion.
Here's the thing. HPE is making the move because it wants greater access to a lucrative tech platform we've been talking about for some time now – artificial intelligence (AI).
The timing is great. IDC says worldwide spending on AI systems will jump 44% this year to $35.8 billion.
And this ranks as a twofer. Cray remains a supercomputing powerhouse. It has won a string of government contracts over the years, which will give HPE a stable sales base.
Cray just scored a $600 million Department of Energy contract to build what is expected to be the world's fastest supercomputer.
Let's not forget that supercomputers play a critical role in AI, which requires massive processing power.
And today, I'm going to tell you of a hidden way to play this exciting AI merger.
Check it out…
What AI Can Do
It's hard to fathom just how much AI-driven supercomputing will change our lives. AI can dive deep into massive swaths of data to find important patterns like fraud, crime, or imminent weather events.
It's also used in machine learning that is sweeping factories all over the world.
No wonder the economic impact will be so stunning. In the United States alone, AI will boost our economic growth rate from 2.6% to 4.6% by 2035. That translates into an additional $8.3 trillion in economic activity, says Accenture.
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Hewlett Packard Enterprise split off from its parent in November 2015 to better focus on advanced tech segments. Bringing in $30 billion in sales, HPE is focused on servers, storage, networking, consulting, and support.
We got a sense of the firm's robust ambitions in August 2016, when it bought another legendary computing house. HPE acquired Silicon Graphics International for $275 million, moving it deeper into big data analytics and high-performance computing.
Yet the recent purchase of Cray is the real crown jewel here. Cray ranks fourth in supercomputing systems, with 49 systems.
It also recently received another mega-contract from the federal government, a $500 million system for Argonne National Laboratory.
But as much as I'm a fan of this merger, I want to be very candid with you. I believe there is a better play out there on the burgeoning AI market.
And it's one that is largely hidden from Wall Street these days, even though it's profiting from a major shift in supercomputing and AI.
This field has always been made up of firms building massive machines that can fill an entire room.
Tomorrow's era of supercomputing will be driven by just one – or a small handful of – semiconductors.
Dominating the AI Market
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.
Tags: tech stocks