Monte Independent Investment Research Vol. XLIV: Quantum Or HPC?

Is it just me or does this week feel like the first workweek of the year? Last week felt somewhat like a practice week before 2025 really kicked off.

I don’t know about you, but I’m starting to feel more euphoric about the market as I write this. Despite the bumpy start to the year, markets appear to be searching for the next major growth trend. Will cloud and AI be the frontrunners? Will the quantum computing hype take control as the next big growth trend?

It appears users of X would suggest quantum computing is about to take off despite being something like 5-10 years away still. The big ticker on the block is IonQ (NYSE: IONQ), growing by 4x in the last year alone. Though I’m not one to nitpick on stocks based on valuation alone, a 267x price-to-sales multiple appears somewhat egregious, perhaps bubble-like.

Though quantum computing can revolutionize industry beyond the capabilities of AI running on high performance computers, quantum comes with certain risks that may make applications somewhat narrow. Amongst the few computer scientists that I know, each has suggested a similar message: quality of computation. Being the fastest in the race doesn’t necessarily make one the winner if they make it to the wrong finish line. i.e. quantum has an accuracy issue that needs to be resolved before commercialization.

Perhaps this mindset has inadvertently led me to miss out on a multibagger like some of my peers, but as many of y’all are well aware, I prefer investing in cash flow rather than hopes and dreams. In the same period of time, my Sprouts Farmers Market (NASDAQ: SFM) shares have appreciated by 5x. Not the sexiest of names given that SFM is a grocery chain that competes with the likes of Aldi and Whole Foods, but hey, it made me a few bucks without the duration risk seen with IONQ.

Though I have only had a handful of multibaggers over my time in the investing world, I’d be lying if I were to say I haven’t had my misses. How many of us can relate to the loss in buying into FireEye (FEYE)? I was joking in my investor group that Micron (MU) has failed me not once, but twice as a swing trade. But hey, there’s always another upcycle to hang on for.

Gartner released their 2025 Global IT spend forecast near the end of 2024 with some optimism for the sector. Capital investing appears to be accelerating from 2024 to 9.3% for total spending to reach $5.7T with the biggest growth drivers remaining in data center systems and software. Not that big of a surprise as these two categories encompass the AI craze that launched in 2024, driving the Nasdaq Index up 25%. Of course, much of the growth was top-heavy; however, this is where the majority of the capital investing resides.

Demand continues to outstrip supply.

Much of the spending across the hyperscalers will remain in sourcing GPU to meet demand. This should help support the Nasdaq darling Nvidia (NVDA) in its growth ambitions, especially as Taiwan Semiconductor (TSM) doubles its manufacturing capacity. Analysts will be keeping a close watch on TSM for capacity improvements as this will be a growth driver for Nvidia.

Gartner’s IT spend forecast is a major turn for GenAI as enterprises are expected to begin spending on GenAI, meaning that applications will be turning from training to inferencing, or from proof-of-concept to utilization. What’s interesting is that the report suggests that reality will be met in terms of the actual capabilities of GenAI as opposed to some lofty expectations that the software will be the next best thing since sliced bread.

As suggested in previous newsletters, AI will not be the user-facing features as seen with GenAI. The money-making/cost-saving features will be running in the background, improving yields, optimizing supply chains, and allowing for firms to “more accurately” forecast. AI will also be leveraged in the factories with more functional/multifunctional robotics. AI will also be utilized as an assistant or a replacement for a lot of the lower-level workforce. Administrative tasks, basic coding, financial modeling and forecasting may all be automated with AI.

Though I have my own use cases for GenAI, I will never put it to work for writing these newsletters or editing them. That would put both me and my editor out of work, which I absolutely will not have.

One interesting factor that came out of Gartner’s 2025 forecast is that devices are expected to accelerate in growth to 9.5%. AI PCs are becoming more heavily manufactured and will soon be the primary model on the floor. The research firm forecasts that 43% of all PC shipments this year will include AI functionality, meaning that workloads can be compiled on the device rather than in the cloud. For the most part, this is the next step in AI where inferencing moves to private data centers and the edge. Ideally, this should save on consumption costs and make GenAI that much more beneficial. After all, the true purpose of GenAI is to leverage one’s own data to improve operations rather than resort to general datasets.

Company Coverage Updates

This week’s cohort of company updates is relatively short and focuses more heavily on the energy industry. I am planning on undertaking a much-needed update on my energy names throughout January with Exxon Mobil, Schlumberger, and Baker Hughes on the docket for next week.

Advanced Micro Devices (NASDAQ: AMD)

AMD Accelerates Product Development To Close The Competitive Gap

If Gartner’s trend turns out to be true, I believe this will be the year Advanced Micro Devices (AMD) has its day in the spotlight. As discussed, AMD’s Instinct GPUs are best utilized for inferencing rather than training, potentially giving the MI325 the competitive edge over Nvidia H200 GPUs.

The semiconductor firm is taking note of the turn to inferencing by accelerating its development process with a 1-year cadence for new product releases. This will place the firm’s GPUs on par with Nvidia in terms of technical capabilities in eFY26 with the release of MI350 and the MI400.

LandBridge (NYSE: LB)

LandBridge Has Good Growth Prospects But Comes At A High Price

LandBridge made a splashy public entrance with a 3x share price appreciation since its IPO in the summer of 2024. The land leasing firm is certainly benefiting from the continued production growth in the Permian Basin, despite the decline in drilling activity. One of the benefits LandBridge is realizing is that producers are improving yields through enhanced oil recovery techniques, leading to more oil production with less producing wells. This means that producers, along with LandBridge, are making more money on a per-acre basis.