Nvidia: Riding the AI Wave
As artificial intelligence continues to shape the future of technology, one company stands out amongst the rest: Nvidia. With its early adaptation of AI technology and dominance in powering machine learning algorithms, Nvidia has secured a significant market share of around 95%, according to New Street Research.
Nvidia’s recent financial performance speaks volumes, with record revenue of $22.1 billion in the fourth quarter of fiscal year 2024, marking a 265% year-over-year increase. Adjusted earnings per share also skyrocketed by 486% to $5.16. This impressive growth trajectory demonstrates Nvidia’s proficiency in meeting the demands of the AI landscape.
Furthermore, Nvidia maintains a strong presence in cloud-based AI processing, where it holds an estimated 95% market share of graphics processing units (GPUs) in data centers. As the global trend toward AI-centered data processing accelerates, Nvidia is poised to capitalize on this growing market, with CEO Jensen Huang anticipating a $2 trillion investment in data center infrastructure over the next few years.
Although Nvidia’s current valuation may seem steep at 38 times forward earnings, its exceptional growth record justifies this premium. Instead of following the crowd into SoundHound AI, investors should consider the steady growth and promising future of Nvidia.
Super Micro Computer: Empowering AI Infrastructure
In the realm of AI infrastructure, Super Micro Computer, commonly known as Supermicro, has emerged as a key player in providing servers optimized for AI workloads. Collaborating with industry giants like Nvidia, Advanced Micro Devices, and Intel, Supermicro ensures that its servers are tailored to work seamlessly with cutting-edge processors.
Supermicro’s fiscal 2024 second-quarter results reflect its success in this space, with net sales reaching $3.66 billion, a remarkable 103% increase year over year. Adjusted earnings per share also rose by 71% to $5.59, driven by strong demand for rack-scale systems designed for AI applications.
Analysts suggest that Supermicro is gaining market share at the expense of competitors like Dell Technologies and Hewlett Packard Enterprise. As the adoption of AI servers continues to surge, Supermicro is well-positioned to benefit from the forecasted 75% annual growth in the AI server market over the next three years, as projected by Bernstein analyst Toni Sacconaghi.
Despite its stock price surging by 842% in the past year, Supermicro remains inexpensively valued at less than 3 times next year’s sales. Given its solid financial performance and potential for further growth, Supermicro presents a compelling alternative to riskier AI investments like SoundHound AI.
By focusing on established leaders like Nvidia and emerging contenders like Super Micro Computer, investors can position themselves for long-term success in the rapidly evolving AI landscape.
Danny Vena has positions in Nvidia and Super Micro Computer. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
