Introducing Two New FANG-Worthy Stocks
There is a new FANG on the block. Chinese stocks listed on the Nasdaq are being bumped from the NYSE FANG+® Index after a volatile year-to-date on the exchange, largely due to Covid-related concerns such as lockdowns, protests and the general slowing of China’s economy.
Two stocks are getting the boot, Alibaba (BABA) and Baidu (BIDU), while Snowflake (SNOW) and Advanced Micro Devices (AMD) are being added. These new constituents join the likes of Meta, Amazon, Apple, Netflix, Microsoft and Alphabet in the ten-strong index.
Snowflake (NYSE: SNOW)
- Market Cap: 48.5 Billion (USD)
- Index Weight: 10%
Snowflake hit the Nasdaq board in September 2020 after one of the largest ever software IPOs worth US$3.4 billion. The data-as-a-service provider was built from the ground up in 2012 and is now used by numerous top S&P 500 companies and businesses around the world including Adobe, Electronic Arts (EA), HubSpot and Western Union. Snowflake’s key offering is its Data Cloud which separates storage and computation functions – meaning users can store and analyse their own as well as third party data all in one place. By combining these capabilities, Snowflake’s Data Cloud facilitates collaboration, cybersecurity, data engineering, data lake, data science and data warehousing.1
Unique as a Snowflake
Snowflake is up against some hefty competition in the data storage and analysis space, including Microsoft and Google. So, what sets it apart? Snowflake doesn’t run its own cloud, rather it sits on top of existing Google Cloud, Microsoft Azure and AWS infrastructure – sourcing and moving data seamlessly into its systems for storage and analysis. Snowflake does this via data lakes which allow multiple users at a time to upload, access and analyse different kinds of data (structured, semi-structed and unstructured). In short, Snowflake is making big data business solutions more accessible for its customers.
Big Opportunity in Big Data
The Covid pandemic fast-tracked many organisations’ adoption of remote working and the need for centralised working platforms. Paired with the increasing use of data insights to power business solutions, Snowflake could experience significant growth in the coming years. According to Statista, the global big data analytics market was worth more than US$240 billion in 2021 and could be valued around US$650 billion before 2030.2 Considering Snowflake’s proven track record it may be in the running to acquire a notable portion of this market share as demand for its services expands. The company’s third quarter revenue of the 2023 fiscal year soared 67% on the previous period to US$557 million from US$334 million.
Advanced Micro Devices (NYSE: AMD)
- Market Cap: 115 Billion (USD)
- Index Weight: 10%
AMD is one of the companies which lay the foundations for Silicon Valley’s famous tech scene in 1969. The semiconductor company has since grown to have a global presence by developing and selling a suite of products which power a wide range of future-focused industries including data centers, artificial intelligence, gaming, communications, and automotives.3 Google and Twitter are among the household names using AMD’s chips for their data centers and Microsoft, Lenovo and Dell also use AMD’s processors for some of their offerings such as cloud computing.
The Jack of all Chips
AMD is one of two semiconductor stocks in the NYSE FANG+® Index, alongside Nvidia. Both use a fabless business model – meaning the companies design and sell the hardware and chips but do not manufacture them. This allows AMD and Nvidia to scale, while allocating more capital towards research, development and growth. Another big semiconductor player, Intel is setting itself apart by manufacturing its chips. There are two kinds of semiconductor chips, Central Processing Units (CPU) and Graphics Processing Units (GPU). Intel and Nvidia focus on CPUs and GPUs respectively, while AMD is the jack of all trades and offers both – positioning the business to go after a larger slice of growing industry demand.
Demand and Revenue Poised for Growth
The semiconductor sector suffered during the pandemic as supply chain issues resulted in shortages across the globe. Competition in the space as well as geopolitical concerns – largely due to the US restricting semiconductor technology exports to China – have also weighed on semiconductor stocks. However, this has sparked a resurgence of securing domestic supply particularly in the US so AMD which is still headquartered in California may benefit from local investment in the space. In the third quarter of the 2023 fiscal year, AMD’s revenue jumped 29% to US$5.6 billion compared to US$4.3 billion in the previous period – indicating its growth potential over the medium to long-term.
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