Every day, consumers are affected by the cloud in some way, shape or form. The ubiquitous presence is in everything from data storage to streaming content to cloud computing to a million items that are ancillary but still directly related to performance from the cloud. That exposure to everyday life will only grow as the Internet of Things (IoT), artificial intelligence (AI) and consumer technology continue to grow.
A new RBC research report notes that the largest cloud and hyperscale providers spend a staggering $60 billion in total capital expenditures each year. Cloud service provider capex grew 8% year over year in the first quarter but declined 14% quarter over quarter. However, the second quarter is expected to grow 17% quarter over quarter and a staggering 19% year over year. The report noted:
We believe that there continues to be opportunity for increasing average selling prices and continued mix-shift to IT hardware-spend, including server CPUs and increased storage spend, as cloud data growth continues to outpace the overall market.
Semiconductor and hard disk drive (HDD) companies stand to benefit the most, and these four top companies are the big winners.
This stock has been on fire over the past year and remains a top pick across Wall Street. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets. Applications for Broadcom’s products in these end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand. Broadcom will report its most recent quarterly results at the end of this month.
Broadcom investors are paid a 1.76% dividend. The Wall Street consensus price target for the stock is $249.03. Shares closed most recently at $231.33.
This leader in semiconductors is working hard to scale away from dependence on personal computers, and the IoT is a big part of the shift. Intel Corp. (NASDAQ: INTC) designs, manufactures and sells integrated digital technology platforms worldwide. The company’s platforms are used in various computing applications comprising notebooks, two-in-one systems, desktops, servers, tablets, smartphones, wireless and wired connectivity products, wearables, retail devices and manufacturing devices, as well as for retail, transportation, industrial, buildings, home use and other market segments.
Earlier this year the company announced the purchase of Mobileye for $15.3 billion. The Israel sensor company gives the chip giant a leg up in the autonomous car competition, and it also adds many other capabilities. This is a big IoT segment going forward.
First-quarter numbers were affected by lower data center spending, but with second quarter and year-over-year numbers expected to grow, the tech giant is well positioned for the future.
Intel investors are paid a 3.03% dividend. The consensus price objective is $40.15. The shares closed most recently at $36.01.