Looking at the "five-bagger stocks" in the United States over the past two years: AI industry transformation and investment opportunities

Summary of Previous Events:

Review of the U.S. Market: AI Leads Absolutely, Driven by AI+ and Infrastructure: Among the 36 fivefold stocks in the U.S. market over two years (from February 14, 2023, to February 14, 2025), AI-related stocks account for 69%, contributing 99% of the market value, making AI the core growth engine globally. In terms of the number of stocks, AI+ business empowerment (48%) and AI infrastructure (32%) are the main contributors, while direct AI applications (20%) are still immature but have significant potential.

AI+ Empowerment: Highly Dispersed Scenarios, Cost Reduction and Efficiency Improvement as Core Benefits: The financial industry leads, with penetration in multiple scenarios such as insurance, personal loans, and payments, while aerospace and energy sectors also present application opportunities. AI significantly reduces companies' SG&A expense ratios (an average of 27 percentage points) and improves total asset turnover (an average of 0.24), leading to substantial cost reduction and efficiency improvement, greatly enhancing companies' gross and net profit margins (averaging 23/64 percentage points), while also contributing to revenue growth.

AI Infrastructure: Computing Power Chips Lead, High-Performance Computing/Data Centers Benefit: NVIDIA (with a sixfold increase and a market value growth of $2.84 trillion) dominates the computing power chip market, leading the demand for high-performance computing/data centers (HPC, cloud computing, quantum computing) and related support (optical modules, power supply). The breakthrough in DeepSeek technology lowers the threshold for AI computing power, potentially igniting demand for domestic computing power chips.

AI Direct Applications: Tool Products Breakthrough First, Application Scenarios are Key: Current AI capabilities and commercialization still have limitations, with direct applications primarily focused on data analysis and other tool types, targeting 2B/2G, showing significant potential. First-mover advantage in capturing market share is crucial. Opportunities in vertical fields are beginning to emerge, and scenario selection is vital, such as Aurora Innovation's autonomous driving platform and Hims&Hers' AI-assisted diagnostic consultation, covering practical scenario needs with promising future prospects.

Summary of Opportunities in the U.S. Market: AI+ empowerment: large space, intense competition, focusing on cost reduction and efficiency improvement scenarios in finance, manufacturing, and other industries. Infrastructure: computing power chips lead, DeepSeek may ignite massive demand for domestic computing power chips. Direct applications: still immature, first-mover advantage is key, tool applications lead, with 2B/2G as the core focus.

The following is the report by Wang Zijing, Chief of Computer at Soochow Securities, dated March 31, 2025:

1. Review of the U.S. Market: AI Leads Absolutely, Driven by AI+ and Infrastructure AI Leads Absolutely in the U.S. Market, Being the Core Growth Point in Recent Two Years

Reviewing the 36 fivefold stocks in the U.S. over the past two years (price increase from February 14, 2023, to February 14, 2025), there are 25 stocks benefiting from AI, accounting for 69%; the total market value of AI-benefiting stocks (as of February 14, 2025) exceeds $4 trillion, accounting for 99%. The non-AI related fivefold stocks in the U.S. over the past two years are mostly small and medium-sized enterprises, indicating that AI is the core growth point in the U.S. and even the global market in recent years

In the past two years, AI-related fivefold stocks in the United States can be mainly divided into three categories: AI+ business empowerment (48%, 12 stocks), AI infrastructure (32%, 8 stocks), and direct AI products/applications (20%, 5 stocks).

AI+ Business Empowerment: Industry Diversification, Finance First Achieves Widespread AI+ Empowerment. Among the fivefold stocks in AI+ business empowerment, the top three industries are finance (33%, 4 stocks), aerospace (17%, 2 stocks), and energy (17%, 2 stocks). The finance sector is the most developed, with core application scenarios including credit evaluation/risk control, payment/trading, etc. AI assists in data analysis, operational management, and risk control to achieve business optimization and efficiency improvement. In industries such as aerospace and energy, AI is also used to assist in large-scale scheduling (e.g., Vistra uses AI to optimize power scheduling and energy production) or operational management in extreme environments (e.g., Redwire, Rocket Lab use AI to assist in space operation management).

AI Infrastructure: Mainly Comprises Computing Power Chips, AI Computing/ Data Centers and Related Support, with NVIDIA Leading the Charge, Benefiting the Rest. NVIDIA, the leader in AI computing power chips, leads the AI infrastructure and even the entire AI industry with a sixfold increase and a market value of $3.4 trillion, with a market value growth of up to $2.84 trillion in the past two years. AI computing/data centers focus on high-performance computing (HPC) and cloud computing, with representative companies including Hut8, Galaxy Digital, TeraWulf, and Super Micro Computer; quantum computing holds promise in high-complexity fields, with representative companies including Rigetti and IonQ. Other related support includes data center optical module components and data center power supply, etc. In the AI infrastructure sector, aside from NVIDIA, fivefold stocks in the past two years (from 2023/2/14 to 2025/2/14) are mostly concentrated in companies with a market value below $10 billion and an increase of less than tenfold, reflecting the industrial advantage and potential opportunities of computing power chips.

Direct AI Products/ Applications: Few and Converging Applications, Mostly AI Business Analysis Tools, with Few Other Direct Applications. Palantir, MicroStrategy, and Innodata provide data analysis and intelligent decision support tools through AI, mainly targeting 2B and 2G scenarios. Only a few companies directly provide AI scenario applications, such as Hims&Hers using AI to assist in diagnosis and treatment recommendations. Overall, direct AI products/applications are still immature but have significant potential, with business models still under continuous exploration; tools such as business analysis are expected to lead in direct AI applications

AI-related companies have dominated the fivefold stocks in the United States over the past two years (from February 14, 2023, to February 14, 2025), with AI+ business empowerment and AI infrastructure as the main driving forces. AI+ business empowerment is primarily concentrated in industries such as finance, aerospace, and energy, with a core focus on cost reduction and efficiency improvement; AI infrastructure, led by computing power chips, focuses on the demand for domestic computing power chips.

2. AI+ Empowerment: Highly Dispersed Scenarios, Cost Reduction and Efficiency Improvement as Core Effects

2.1. Scenario Dispersion: Finance, Aerospace, and Energy Dominate, with Opportunities in Advertising, Retail, and Healthcare

Finance is the primary industry for AI+ empowerment, with credit evaluation risk control and trading optimization as core scenarios. Among the 12 companies engaged in AI+ business empowerment, there are 4 in the finance sector, occupying a leading position. The business types of these companies include loans, payments, insurance, and cryptocurrency. Among them, the cryptocurrency trading company Robinhood and the "buy now, pay later" (BNPL) service company Affirm have market capitalizations exceeding $10 billion, with market values of $57.7 billion and $25.7 billion, respectively, as of February 14, 2025.

In the aerospace sector, AI primarily plays a role in intelligent planning and analysis. Rocket Lab provides small satellite launch services and designs and manufactures small orbital launchers, while Redwire offers comprehensive design, manufacturing, and testing services for spacecraft and satellites. Both leverage AI's intelligent planning and analysis capabilities to empower task management, optimizing spacecraft mission execution and satellite launch tasks. As of February 14, 2025, Rocket Lab and Redwire have market capitalizations of $14 billion and $1.6 billion, respectively.

In the energy sector, AI is mainly used for operational monitoring and fault prediction. Vistra focuses on the production, transportation, and sales of traditional energy sources such as electricity and natural gas, applying AI to power dispatch and energy production, monitoring the production and transportation process, and predicting faults in a timely manner to enhance system stability. NANO Nuclear develops portable micro nuclear reactors and collaborates with AI company Everstar to monitor nuclear power efficiency and safety using AI. As of February 14, 2025, Vistra and NANO Nuclear have market capitalizations of $5.7 billion and $1.2 billion, respectively.

2.2. AI+ Cost Reduction and Efficiency Improvement are Significant, with Certain Revenue Growth Effects; Applications such as Credit Evaluation/Risk Control are Promising for the Future. Companies engaged in AI+ business empowerment have generally seen an increase in gross profit margins and net profit margins since 2023, with reduced labor costs being a key reason. Among the 12 fivefold stock companies engaged in AI+ business empowerment in the United States over the past two years, excluding NANO Nuclear, which has no revenue, there are 9 companies in 2023 In 2024, there will be a significant reduction in SG&A expense ratios, with 9 companies showing a notable increase in total asset turnover. From the average financial metrics of these 12 companies, the SG&A expense ratio for AI+ business companies decreased by an average of 27 percentage points in 2023 and 2024, while the total asset turnover ratio increased by an average of 0.24 times, and the gross/net profit margins improved by an average of 23/64 percentage points. The introduction of AI has greatly saved labor costs and improved operational efficiency, promoting cost reduction and efficiency enhancement, leading to improved profit levels.

AI+ companies have shown a trend of revenue growth recovery since 2023, with AI having the most significant revenue increase effect in the financial industry. On the revenue side, AI+ companies have shown an overall trend of revenue growth recovery since 2023, with 3 companies showing a clear upward trend in revenue growth, including 2 financial companies (Root, Robinhood) and 1 advertising company. Additionally, 4 companies, including Dave (financial payment), Vistra (energy), Vertiv (infrastructure management), and GeneDx (genetic testing), have also shown a trend of revenue growth recovery.

Some AI+ financial companies have seen a continuous decrease in credit loss/premium payout ratios since 2023, indicating that AI has certain credit rating and risk control capabilities, but there are significant differences among companies. Root (auto insurance) and Dave (buy now, pay later) have shown a significant downward trend in credit loss/premium payout ratios since 2023, while the other two companies have not shown any significant changes. The application of AI in credit rating/risk control has certain potential, but it may be more dependent on the company's AI technology capabilities, and currently, it is more reflected in cost reduction and efficiency enhancement under similar credit rating/risk control levels.

AI+ application scenarios are highly dispersed, with cost reduction and efficiency enhancement as the core benefits. The financial industry is a leader in AI+, with AI technology widely applied in credit rating and risk control, payment transactions, and other scenarios, significantly reducing company costs and improving efficiency. Industries such as aerospace and energy are also actively applying AI technology to achieve intelligent management and operations, resulting in significant labor cost savings.

3. AI Infrastructure: Computing power chips lead the way, high-performance computing/data centers benefit

Computing power chips lead AI infrastructure, and DeepSeek may ignite domestic inference computing power demand. As of February 14, 2025, NVIDIA, the leader in AI computing power chips, has led AI infrastructure and the entire AI industry with a 6-fold increase (over nearly 2 years) and a market value of $3.4 trillion. In January 2025, with the official launch of DeepSeek, it became possible to train AI models with lower computing power, significantly lowering the threshold for AI computing power At the same time, the Scaling Law indicates that computing power continues to play an indispensable role in enhancing the capabilities of AI models. Given the current restrictions on high-end GPU imports from NVIDIA, DeepSeek may ignite the demand for domestic computing chips such as Cambrian and Haiguang.

In the past two years, AI computing/data center companies have shown rapid growth, primarily focusing on high-performance computing (HPC), with quantum computing also having growth potential. Galaxy Digital, TeraWulf, and Super Micro Computer provide cloud computing and high-performance computing services based on their own data centers; Regetti and IonQ offer quantum computing platforms and quantum processors, which are expected to achieve higher computational efficiency in complex problems such as drug development and financial modeling. IonQ has already secured an order of approximately $50 million from the U.S. Air Force Research Laboratory (AFRL) in 2024.

Computing chips are the core of AI infrastructure. NVIDIA dominates the market with its powerful GPU products, leading the AI industry and driving growth in computing/data centers and other fields. The technological breakthroughs of DeepSeek lower the threshold for AI computing power, which may ignite the demand for domestic computing chips. High-performance computing, cloud computing data centers, and quantum computing will also benefit and welcome growth opportunities.

4. Direct AI Applications: Tool Products Lead the Breakthrough, Application Scenarios are Key

There are few direct AI application companies, but the market space and opportunities are very large. In the past two years, among the five-fold stocks in the U.S., although there are only five direct AI application companies, four of them have surpassed a market value of $10 billion, with Palantir reaching a market value of $271.4 billion, igniting the tool-based AI applications.

Tool applications align with AI capability advantages, with 2B/2G being the core growth point. Palantir, MicroStrategy, and Innodata all focus on AI data analysis as their core business, fully leveraging the advantages of AI data processing and logical analysis. As of February 14, 2025, their market values are $271.4 billion, $8.53 billion, and $1.6 billion, respectively. Due to the currently high costs of AI and the low willingness of individual users to pay for tool software, all three companies focus on the 2B/2G model. For instance, Palantir's orders from major clients like the Department of Defense will become a core growth trigger.

Leading tool application companies are racing to establish a presence, reflecting the advantages of being first to market. MicroStrategy, as the largest corporate holder of Bitcoin, significantly acquired Bitcoin in 2024 to gain pricing power, resulting in a substantial portion of its market value of over $80 billion coming from cryptocurrency. In this regard, although the U.S. market for AI tool applications is vast, it has nearly formed a situation where Palantir dominates the market. By securing orders from major clients like the U.S. and UK Departments of Defense, Palantir has gained market recognition and achieved rapid growth and expansion, fully demonstrating the importance of first-mover advantages in this sector Autonomous Driving and AI Lead in Direct Applications in Vertical Fields, Other Tracks May Have Potential Opportunities. The Aurora Driver platform developed by Aurora Innovation integrates autonomous driving hardware, software, and data, adaptable to various vehicle types. Hims&Hers is an online healthcare consultation platform that applied AI-assisted medical consultation for diagnosis and treatment recommendations in 2023, achieving rapid breakthroughs in areas such as skincare, mental health, and sexual health. Its success suggests that, in addition to complex medical inquiries, there remains a significant demand for common, low-complexity, and low-risk needs in the healthcare sector, which can leverage AI's advantages while avoiding negative consequences from overly specialized complex issues. By this example, it can also be inferred that professional fields like AI4Science may still have room for AI to play to its strengths.

The number of companies with direct AI applications is relatively small, mainly concentrated in tool-type products such as data analysis, targeting 2B/2G scenarios. Companies like Palantir have captured large orders from the U.S. Department of Defense due to their first-mover advantage, rapidly growing in the tool-type AI market, reflecting the significant first-mover advantage in this track. Aurora Innovation's autonomous driving platform and Hims&Hers' AI-assisted medical consultation also demonstrate breakthroughs and application potential for AI in vertical fields, further providing application ideas in highly practical and specialized scenarios.

5. Summary and Insights

AI+ Empowerment: Large space, intense competition, focusing on cost reduction and efficiency improvement in industries such as finance and manufacturing.

Infrastructure: Computing power chips lead the way, DeepSeek may ignite massive demand for domestic computing power chips.

Direct Applications: Still immature, first-mover advantage is key, tool-type applications lead, with 2B/2G as the core focus.

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