Nvidia (NASDAQ: NVDA) recently reported astonishing growth figures with both revenue and net income skyrocketing into the billions in triple-digit increments. This AI chip leader set new records as more businesses embraced its high-performance chips and related offerings, culminating in revenue soaring past $22 billion.
Despite a remarkable 285% surge in Nvidia’s stock price over the past year, the company remains a solid investment due to its promising future outlook. However, there is an alternative way to reap the benefits of Nvidia’s success without direct ownership. Investing in companies closely aligned with this chip giant, such as leading cloud service provider Amazon (NASDAQ: AMZN) and server heavyweight Super Micro Computer (NASDAQ: SMCI), presents a lucrative opportunity.
But why pursue this strategy? By doing so, investors can gain exposure to Nvidia’s growth while also tapping into other flourishing sectors. Let’s delve deeper into each option.
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Amazon: Maximizing Growth Potential
Amazon’s AWS stands as the premier cloud services provider globally, driving substantial profitability for the corporation. AWS offers clients a diverse array of cloud solutions, with a recent emphasis on AI technology. By acquiring Amazon shares, investors can capitalize on Nvidia’s growth as AWS incorporates Nvidia’s GPUs into its offerings. Amazon houses various Nvidia products and services like the Nvidia AI Enterprise platform, boosting AI development. Last year, AWS and Nvidia expanded their collaboration to develop the quickest AI supercomputer – powered by Nvidia GPUs, naturally.
Given AWS’s extensive user base, companies already utilizing its services are likely to turn to Amazon for Nvidia products, presenting Amazon with a significant revenue growth opportunity moving forward.
Furthermore, by investing in Amazon, shareholders also leverage the company’s burgeoning e-commerce segment, adding to its growth potential and consistent earnings history. With Amazon trading at 41 times forward earnings estimates, it stands as an attractive investment choice.
Super Micro Computer: Leveraging Innovation
Super Micro Computer specializes in servers, storage systems, and customized rack solutions. Employing a modular approach to product construction, Supermicro tailors systems to meet specific customer requirements. By closely monitoring Nvidia’s product advancements, Supermicro ensures seamless integration of Nvidia innovations into its products upon release. This collaborative relationship extends to other chip companies like Advanced Micro Devices and Intel, enabling Supermicro to capitalize on the growth across the sector.
The company’s strategy of providing tailored products powered by cutting-edge chips has driven record demand for systems in the latest quarter, featuring chips from industry leaders, including Nvidia.
As Super Micro Computer’s earnings surge, fueled by collaborations with AI chip giants, the company reported its inaugural $2 billion quarter in fiscal year 2023, three decades post-launch. With revenue projected to soar by at least 101% to $14.3 billion in the current fiscal year, Supermicro emerges as a top AI growth stock.
The alignment with leading chipmakers ensures Supermicro’s success mirrors theirs, making the stock’s valuation of 40 times forward earnings estimates appear quite reasonable.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino holds positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool suggests Intel and Super Micro Computer and suggests options like long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool follows a disclosure policy.
The perspectives expressed herein belong to the author and may not necessarily align with those of Nasdaq, Inc.
