While many growth investors buy into the promise of artificial intelligence (AI) through mega-cap players such as Nvidia, Microsoft and Meta, companies whose products are necessary for building the supporting infrastructure are often overlooked.
One of these is Corning (NYSE: GLW), the long-established $38 billion US speciality glass and ceramics company. It is often dismissed as an industrial group, but investors have slowly been recognising that the company is an emerging technology stock playing a vital role in AI.
Corning stock rallies ahead
Earlier this month, the group gave an upbeat report on current trading; it formally announces its second-quarter results this week. Turnover in the second quarter is now expected to reach $3.6 billion, compared with previous expectations of $3.4 billion.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Corning’s markets are buoyant enough for management to anticipate continuing sales growth throughout the year. Core earnings per share in the quarter should show a return to year-on-year growth. They are likely to meet or exceed the top end of management’s guidance of between $0.42 and $0.46. The company sees itself in the early stages of a three-year programme that will add annualised sales of $3 billion to the current expected total of $12.6 billion. So what is driving this outperformance, which the company says is sustainable?
Longstanding CEO Wendell Weeks says the accelerating performance is down to AI. Corning is also seeing encouraging trends in other areas such as optical communications and display screens – it makes the glass on iPhones and many other mobile phone brands, for example, as well as for car dashboards. But the game-changing action is in data centres, which is a key foundation of the AI market.
For AI to work, you need to store, memorise and harvest vast amounts of data to be able to generate the responses that systems and people need. Data centres house hundreds of thousands of computers, or “servers” with very fast microchips. These are the superfast chips that have made Nvidia top of its market.
You need all these chips working together like a vast brain – they call this a “neural network”, like a super-computer sifting and recognising data patterns to solve problems and questions on an unimaginable scale.
We know all about the chips because Nvidia is never out of the news. But what about the connections between all those super-fast processors? You cannot have a “neural network” without top-quality cabling that connects them. We hear much less about cabling, but that is where Corning comes in. In the 1970s, Corning’s team was behind workable fibre-optic cable, providing a huge advance in data-carrying capacity compared with copper wire. And today Corning is the maker of much of the physical fibre cable in the US.
In short, data centres and generative AI need fibre-optic cabling and Corning is a leader. The “neural networks” for generative AI need about 10 times more fibre connections than a traditional data centre.
Clearly, this implies a jump in sales volumes for Corning but also creates value-added products to fit all those extra connections into the same spaces. It’s been inventing new fibres, cables, connectors and solutions. These help customers cut installation costs and project time frames. It also reduces their carbon footprints.
As Wendell Weeks put it recently, Corning is “the connectivity that brings the hardware to life”. That is why Corning should increasingly be appreciated as a company tied to the growth of AI. Corning is part of a secular shift in the technology sector, and as the word spreads, the shares should gain.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
What has Labour said about stamp duty?Critics say stamp duty is clogging up the property market, but the chancellor is unlikely to address it in her Budget
-
Ofcom fibre broadband reforms to force providers to be ‘clearer’ about internet connection typesNews Providers currently use ‘fibre broadband’ as a catch-all term. But Ofcom wants them to give consumers greater clarity on whether they will get full-fibre or a partial connection.
-
Investing in IPOs: a good idea or a risky affair?IPOs are far more likely to underperform the market than deliver spectacular gains. Here's why investors shouldn't get excited
-
Higher rates hamper Reits – are they still worth buying?Shares in Reits have been under pressure and, as a result, discounts to net asset value are likely to persist for some time – focus on income over value
-
Are shares disconnecting from reality?What effect is passive investing having on shares, and are ETFs going the same way?
-
The peak of the AI frenzy has passedWhen did the AI frenzy peak and what does it mean for tech companies?
-
The battle against heart disease and how to invest in itHeart disease is soaring due to rising obesity and an ageing population. But new drugs, treatments and diagnostic tools are on the way.
-
Woodside Energy: an undervalued energy playWoodside Energy offers a cheap way to invest in the growth of the global LNG market. Should you invest?
-
Small caps: how to ride the recovery wave of UK equitiesProfessional investor Ken Wotton highlights British small caps that hit the sweet spot of the British equity market
-
Investing in defence: the easiest way to buy into the boomThe defence sector has taken off, but the opportunities for stock picking are more limited. We explain what to buy
