BrainChip (ASX:BRN): An exciting AI stock with an immense opportunity ahead

Nick Sundich Nick Sundich, June 25, 2024

BrainChip is one of just a very few AI stocks on ASX

BrainChip (ASX:BRN) is one of a few companies on the ASX that is substantially exposed to Artificial Intelligence (AI). The company is commercialising and developing a neuromorphic technology known as Akida.

 

What is so special about Akida

Akida is proprietary intellectual property (IP) added to a chip that enables the chip to function in a similar way to the human brain instead of relying on externally-set software-based algorithms. It can operate and learn ‘in the field’ without a continuous internet connection and when it is already deployed. Akida, and any device it is used in by extension, can make decisions much faster as a consequence.

The secret sauce is Akida’s ability to convert traditional computing networks into Spiking Neural Networks (SNNs), which learn from so-called events (the inputs, or spikes) by attributing higher or lower importance (synaptic weights) to different spikes, similar to how the biological brain works. This allows BrainChip’s customers to run their current networks, while taking advantage of the Akida architecture.

What’s more is that despite Akida having such remarkable capabilities, it is less power-hungry compared to other neural networks, needing only fractions of a watt to operate. This means it can operate longer than other networks, extremely beneficial in Edge applications where battery life is a major concern.

Our parent company, Pitt Street Research, just published detailed research on Brainchip and the initiation report takes a close look at how specifically Akida and neuromorphic computing work in practice.

Read the full report below!

BrainChip research report

 

The world is Akida’s oyster

The rise of prominent consumer AI products, most pertinently ChatGPT, has given a glimpse of AI’s capabilities, but has also given a false impression that the race is well underway. In reality, AI is only at its early stages of development. Edge AI in particular is where we see very substantial, long-term growth and Akida is ideally suited to meet the specific requirements of Edge AI, in our view.

The neuromorphic computing and Edge AI markets were worth US$6.4bn and US$17.5bn respectively in 2023. Both markets are expected to roughly quadruple in the next six years, to US$24.5bn and US$62.9bn respectively by 2030. We expect BrainChip will be able to benefit from this massive growth through collaborations with industry partners and direct deals with customers, because ultimately Akida can be useful in essentially any electronic device that would benefit from on-board AI.

As more and more functionality is expected of electronic devices with each new generation, data processing and storage requirements seem to grow almost exponentially. The world cannot just ‘build more data centres’ because of their environmental footprint, i.e. they consume massive amounts of energy! The traditional approach to AI just uses more force (a next generation of an NVIDIA AI chip for instance) in the same old computer architecture.

 

So, when will the company re-rate?

The one thing many investors are waiting for is BrainChip’s first recurring revenues, i.e. not just one-off license fees from new customers. This will require converting current commercial deals into the royalty generating phase, which requires Akida being designed into commercially available products that are subsequently mass-produced.

But obviously, commercial deals with new customers will likely also be good catalysts for the share price.

 

Disclosure: Pitt Street Research directors own shares in BrainChip. BrainChip is a research client of Pitt Street Research, which owns Stocks Down Under.

This article about BrainChip (ASX:BRN) is not financial advice. Also note that Small caps are risky and you can easily lose money in these kinds of stocks (but you probably already knew that).

 

What are the Best ASX Technology Stocks to invest in right now?

Check our buy/sell tips

 

Blog Categories

Get Our Top 5 ASX Stocks for FY25

Recent Posts

custodian trades

Custodian trades: Here’s why it wasn’t really JP Morgan, HSBC or CBA that risked their money on your stock

Custodian trades are trades that make it appear like a major bank has bought or sold your company, but it…

ross stores

Ross Stores (NDQ:ROST): US$20bn in revenues from serving America’s depraved working class

Ross Stores (NDQ:ROST) is an S&P 500 company that is well and truly for the working class, being America’s largest…

ASX IPOs that bounced back

6 ASX IPOs that bounced back with a vengeance after a nuanced debut

The list of ASX IPOs that bounced back is nowhere near as long as the list of IPOs that flopped…