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Throughout the FTSE 100, there are a variety of corporations that provide publicity to synthetic intelligence (AI). From knowledge corporations like RELX and London Inventory Trade Group to funding trusts like Scottish Mortgage, there are many methods to get publicity to the theme.
Right here, I’m going to spotlight a much less apparent Footsie play on synthetic intelligence. I reckon this under-the-radar firm might find yourself being a serious beneficiary of the AI revolution.
Publicity to the AI theme
One factor we find out about AI is that it requires numerous computing energy.
Which means demand for high-power AI chips is more likely to rise considerably within the years forward.
Now, one solution to play this theme is to spend money on chip corporations like Nvidia (which I’ve already performed).
One other approach, nonetheless, is to spend money on corporations which can be serving to chip producers like Taiwan Semiconductor and Samsung construct new manufacturing vegetation to fulfill the excessive stage of demand.
That is the place FTSE 100 firm Ashtead (LSE: AHT) is available in.
A picks-and-shovels play
Ashtead is among the world’s largest building gear rental corporations.
Working within the US, Canada, and the UK, it has greater than one million rental belongings on its books – gear that can be utilized to carry, energy, transfer, dig, drill, help, scrub, pump, and extra.
What I like about it from an funding standpoint is that it generates most of its revenues within the US at present.
Which means it’s very well positioned to capitalise on the chip manufacturing growth, because the US authorities is spending billions to ramp up manufacturing within the nation.
Finally, it’s a ‘picks-and-shovels’ play on the AI theme (fairly actually).
The share worth is rising
I feel buyers are already beginning to catch on.
Within the final month, Ashtead’s share worth has risen about 14%.
This might be associated to the truth that Taiwan Semiconductor was simply awarded $6.6bn from the US authorities to develop manufacturing at a chip manufacturing plant it’s constructing in Arizona.
Or, it might be associated to the truth that Samsung is about to obtain over $6bn in US chip subsidies to develop its chip manufacturing amenities in Texas.
I imagine there’s lots extra to return from this inventory, nonetheless.
12 months thus far, shares in US rival United Leases are up about 20%. But Ashtead shares are solely up about 6%. So, I reckon there’s some catching as much as do.
As for the P/E ratio, it’s a little bit below 18, which isn’t significantly excessive.
It’s price noting that earlier this 12 months, analysts at JP Morgan raised their worth goal for Ashtead to six,800p. That’s about 18% above the present share worth.
New all-time highs on the way in which?
Now, I’ve to level out that Ashtead operates in a cyclical trade.
So whereas there’s a long-term development story right here, we might see trade turbulence within the quick time period, particularly if financial circumstances weaken.
I’m fairly excited by the potential, nonetheless.
Given the backdrop, I feel it’s solely a matter of time till Ashtead shares soar to new all-time highs.
