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While semiconductor industry darling Nvidia grabs headlines for its impressive stock performance, fueled by excitement around artificial intelligence, a lesser-known German company is also on track to nearly double its stock price in 2024. I’m secretly looking forward to it. ParTec, a developer of supercomputing systems, soared more than $95. % year-to-date as investors began to take notice of its potential. Although the company has been listed on the Frankfurt Stock Exchange for less than a year, its roots go back to 1999, when it was founded as a spin-off from Germany’s Karlsruhe Institute of Technology. The small-cap company, which had total sales of 52 million euros ($56 million) in the first half of last year, has signed a 300 million euro ($327 million) deal to build the continent’s first ultra-powerful supercomputer. That system, Jupiter, is expected to be capable of at least one quintillion, or one billion, calculations per second. JY0-DE 1Y line What is the reception from investors? Hendrik Leber, fund manager at Acatis Datini Valueflex Fonds, said he owns ParTec shares and believes the company is a “very clear” investment opportunity. “Europe wants to spend billions of dollars on supercomputing over the next few years, and we want to use it within the EU. ParTec has the technology to make that happen and It will put us in a good position to bid,” Lever added. . What exactly does ParTec do?ParTec has 60 to 70 employees and primarily provides the software systems needed to set up supercomputers for research purposes. “Their main product is software ‘middleware,’ which could be a quantum computer in the future,” Miguel Lago Mascato, senior equity analyst at equity research firm Montega, told CNBC Pro. . Lago Mascato expects the company’s shares to rise a further 21% to 130 euros over the next 12 months. Although competitors like Hewlett-Packard may also bid on supercomputing projects, Lago-Mascato said Partek’s middleware gives the company a “unique selling point.” Patents and Royalties Earlier this year, independent auditors valued Partek’s 150 patents related to supercomputer construction and design at €767 million, which the company says will “significantly strengthen” its capital position. I hope so. However, there is skepticism about whether the company will be able to monetize its patent portfolio. “At this time, it is very unlikely that ParTec will realize licensing income from its patent portfolio in the near future,” he Lago Mascato said candidly. But fund manager Lever dismissed concerns about a lack of royalties, pointing to the €300m Jupiter deal as an example of substantial cash flow. “The order is very real and the economic benefits are very real,” Lever said. “I’m not interested in an overall valuation of a patent portfolio. I’m looking at a very real computing center, where revenues and profits are coming from.” Liquidity Risk Investors are looking at ParTec Another risk factor to be aware of is the stock’s limited liquidity. Less than 13% of the company’s stock is free float. Lever noted that due to low trading volumes, even a €2 million stock order took about a month to complete. This lack of liquidity means that stock prices do not always effectively reflect a company’s fundamental value. Future Opportunities with AI ParTec sees significant opportunities beyond traditional supercomputing by providing customized systems for training large-scale AI models. ParTec CEO Bernhard Frohwitter told CNBC Pro that there is a huge demand for systems with context understanding that go beyond just language models. Large-scale language models, such as the one behind ChatGPT, generate text, images, and video by predicting the next word or pixel in a sequence. But companies are instead looking for AI models that require “internal logic” from physics, mathematics and mechanics, Frohwitter said. ParTec is already under “a lot of pressure from institutions and even governments” to build machines that can train these basic AI models, Frowitter added. “We’re in the process right now,” he said. “In the coming months, we’ll have an artificial intelligence machine that can do things like training, data management, and inference all at once.”
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