Denny Hamlin was ready to clinch his first NASCAR championship... but it all fell apart because of a piece of tape. Hamlin was considered one of the best drivers of his generation. But he had never won a championship title.
NASCAR's Surprise Lesson About Investing in the AI Boom
By Joe Austin, senior analyst, Chaikin Analytics
Denny Hamlin was ready to clinch his first NASCAR championship... but it all fell apart because of a piece of tape.
Hamlin was considered one of the best drivers of his generation. But he had never won a championship title.
In 2018, he didn't even win a race. However, in 2019, he was NASCAR's comeback kid...
Hamlin had already won six times that season. Those wins included the iconic Daytona 500.
The season all came down to a cool night in November at the Homestead-Miami Speedway. Hamlin was there with his new crew chief, Chris Gabehart.
The day started well enough for Hamlin. The race's qualifying session had been canceled due to bad weather. That gave Hamlin the coveted pole position because of his points standing.
In the first two stages, he finished fifth. By the third stage, things were looking up...
Hamlin was running second, but he posted quicker lap times than his teammate Kyle Busch, who led the race.
Then, with just 58 laps to go, Gabehart made a fateful decision...
He called Hamlin in for an early pit stop. And he had the crew slap a big piece of black tape on the front grille of Hamlin's car.
You see, Gabehart thought the tape would give the car better aerodynamics. He expected that trick would give Hamlin the speed needed to win.
But the plan quickly fell apart. The tape blocked airflow to the car's engine. That caused the engine to overheat.
Gabehart had to call Hamlin back to the pit after just 12 laps.
Hamlin finished in 10th place – dead last among the four championship contenders. Busch won both the race and the title.
Gabehart's tape decision was aggressive, but it wasn't unusual. In NASCAR, crews routinely put tape on grilles to gain a competitive edge.
Normally, air enters the grille and bounces around the engine. That creates drag.
Tape restricts that airflow. It forces the air to flow smoothly over the car instead.
That results in more speed... and more downforce pushing the car onto the track for better grip.
But tape also restricts cooling.
NASCAR engines can run at around 290 degrees Fahrenheit. That's about 90 degrees hotter than a typical road car.
In Hamlin's case, the tape gamble backfired immediately.
The temperature gauges maxed out. Steam started spewing from the engine. And an engine failure seemed imminent.
Excessive heat isn't just a NASCAR problem...
Data centers running AI chips face the exact same dilemma. And for investors, companies solving power issues inside their data centers means opportunity...
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Finding 'Behind the Scenes' Companies
AI chips need massive power to train models and run computations.
But more power means more heat. And if you can't cool the chips fast enough, performance crashes... or the hardware fails entirely.
Inside data centers are long rows of computer racks. These are tall cabinets stacked with servers. You're probably familiar with pictures like this...
A typical AI data center contains hundreds or even thousands of racks.
Nvidia's (NVDA) next-generation Vera Rubin chip uses 120 kilowatts to 130 kilowatts per rack. That's the annual consumption of about 100 U.S. homes.
Bigger versions of the Rubin chip will use 5 times that much power.
That creates an unavoidable physics problem...
More power means more heat, in a nearly 1-to-1 relationship.
And delivering this much electricity requires rethinking power delivery...
It's like water going through a hose. You can deliver the same amount with high pressure through a small hose or low pressure through a massive hose.
Electrical power works the same way – high voltage with low current or low voltage with high current.
High current can dangerously overheat cables. Traditional power systems can't handle it.
Engineers solved this by raising the voltage. They moved to 800-volt power systems, which deliver the same power with far less current.
But operating at 800 volts requires power chips made from entirely different materials – ones that a handful of companies are making. And this gets to a bigger point about investing in a huge tech trend like AI...
The AI technology itself gets the big attention from the media. But "picks and shovels" companies are needed to make it all work.
Those companies are helping solve power issues like excessive heat. And they're making the components and special materials for all that equipment inside data centers.
So no matter which big-name AI company is building the data centers... keep an eye on the stocks of the "behind the scenes" businesses helping make them run.
Good investing,
Joe Austin
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.77%
7
19
4
S&P 500
+0.73%
126
283
89
Nasdaq
+1.07%
25
51
24
Small Caps
+1.09%
565
973
349
Bonds
+0.18%
Consumer Discretionary
+1.52%
6
26
16
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bullish. Major indexes are all bullish.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+2.51%
Utilities
+1.77%
Consumer Staples
+1.75%
Communication
+1.54%
Materials
+1.25%
Industrials
+1.09%
Information Technology
+0.6%
Consumer Discretionary
+0.6%
Health Care
+0.32%
Real Estate
-0.48%
Financial
-2.34%
* * * *
Industry Focus
Mining Services
21
11
3
Over the past 6 months, the Mining subsector (XME) has outperformed the S&P 500 by +41.02%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #6 of 21 subsectors.
Top Stocks
AA
Alcoa Corporation
CDE
Coeur Mining, Inc.
BTU
Peabody Energy Corpo
* * * *
Top Movers
Gainers
KEYS
+23.05%
AMD
+8.77%
PYPL
+6.74%
CEG
+6.41%
FDS
+5.9%
Losers
EXPD
-7.22%
OKE
-5.08%
MOH
-5.06%
FICO
-4.21%
SNDK
-4.2%
* * * *
Earnings Report
Earnings Surprises
AXON Axon Enterprise, Inc.
Q4
$2.15
Beat by $0.55
O Realty Income Corporation
Q4
$0.33
Missed by $-0.08
AMT American Tower Corporation
Q4
$1.75
Beat by $0.28
NRG NRG Energy, Inc.
Q4
$1.04
Beat by $0.15
CSGP CoStar Group, Inc.
Q4
$0.31
Beat by $0.04
* * * *
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