Year to date, Nvidia ( NVDA 1.67% ) and Micro Computer Super ( SMCI 1.70% ) have shown the strongest performance in the stock market Nasdaq 100 two out of the top three stocks that performed well S&P 500 Both companies have decided to divide their stocks in order to lower the price of shares. In particular, Nvidia has finished a A stock split in which each share is divided into ten shares. During the month of June, Supermicro experienced… A stock split in the ratio of 10 shares for every 1 share held. scheduled for September.
Surprisingly, Wall Street is optimistic about both companies. The average price targets suggest a potential increase of 21% for Nvidia and 22% for Supermicro, while some analysts predict even greater gains in the future.
- An analysis was published in June by Beth Kindig at the I/O Fund. Forbes that estimates Nvidia’s value will reach $10 trillion by 2030, mirroring a forecast. Jim Cramer Created two years ago. This suggests a potential increase of 245% from its current market value of $2.9 trillion.
- Ananda Baruah from Loop Capital increased his one-year target price for Supermicro to $1,500 per share in April, indicating a potential increase of 165% from its current price of $567 per share. Likewise, Hans Mosesmann at Rosenblatt established a price target of $1,300 per share, suggesting a 129% upside.
Here is some key information that investors should be aware of regarding these AI stocks.
1. Nvidia
Nvidia units that process graphics Originally intended for rendering computer graphics in video games and 3D design, GPUs were repurposed as data center accelerators with the introduction of the CUDA parallel computing platform in 2006. CUDA has since developed into a comprehensive set of software tools that simplify the creation of GPU-accelerated applications in fields ranging from computational chemistry to. AI .
Nvidia has a strong presence in the data center accelerator market, capturing 98% of data center GPU shipments in 2023. semiconductor TechInsights analysts have reported that Nvidia dominates the market for AI processors with a market share exceeding 80%.
One reason for their dominance is the superior performance they exhibit. Nvidia GPUs consistently surpass rival chips in MLPerf benchmarks, which offer impartial assessments of AI systems during both training and inference stages.
Nevertheless, the company is highly impressive as it provides a comprehensive computing solution that includes both hardware and software required by businesses to create, launch, and oversee AI applications. This goes beyond just GPUs and CUDA. Nvidia also offers additional data center hardware, such as networking devices and CPUs, and delivers a complete AI service known as DGX Cloud.
Nvidia’s financial performance for the first quarter of fiscal year 2025, ending in April 2024, exceeded expectations. The company saw a significant 262% rise in revenue to reach $26 billion, driven by robust growth in the data center sector. non-GAAP The company’s profit increased significantly by 461% to $6.12 per share when adjusted for dilution. CEO Jensen Huang mentioned that the growth in the data center sector was driven by a robust and increasing need for generative AI training and inference on the Hopper platform.
According to analysts on Wall Street, Nvidia is projected to increase its adjusted earnings by 52% each year until the end of fiscal 2026, in January 2026. This consensus forecast indicates that the current valuation of Nvidia at 57.7 times adjusted earnings appears to be justified.
Those looking to invest in Nvidia should consider starting with a small investment now. If the stock price decreases after the earnings report on August 28, it could be a good chance to increase your investment slightly.
In the future, I think Nvidia has the potential to become a $10 trillion company, but I have doubts about it achieving this by the year 2030.
Super Micro Computer is a company that specializes in computer hardware.
Supermicro produces advanced computing systems, such as storage options and servers specifically designed for demanding tasks such as data analysis and artificial intelligence. The company is a key player in the AI server industry, thanks to its innovative product design and in-house manufacturing capabilities.
Supermicro creates electronic components that can be put together to build servers in a wide variety of ways, offering customers more flexibility compared to their competitors who have a more restricted selection. The publication known as The Wall Street Journal The company is responsible for managing the majority of research, development, and assembly at its facilities. Silicon Valley , which facilitate the quick deployment of servers equipped with the newest technology from manufacturers such as Nvidia.
Supermicro’s financial performance in the fourth quarter of fiscal 2024 was a combination of positive and negative results. Revenue significantly increased by 143% to $5.3 billion due to high demand for AI infrastructure. However, the non-GAAP net income only grew by 78% to $6.25 per diluted share. This slower growth was attributed to the costs related to direct liquid cooling (DLC) components, which impacted profit margins.
Wall Street was expecting a 130% increase in adjusted earnings. However, due to falling short of this expectation, the stock plummeted by 17% after the report was released.
On the earnings call, management offered significant background information. The profit margin before deducting expenses is called the gross profit margin. In the fourth quarter, there was a decrease of 5.8 percentage points to 11.2% in a certain metric, as shared by CFO David Weigand with analysts. He mentioned that this metric is expected to stabilize within the range of 14% to 17% by the conclusion of the fiscal year 2025 as the DLC manufacturing capability expands. Additionally, by investing in DLC, Supermicro could potentially increase its market presence in AI servers.
The use of liquid-cooled AI servers in data centers is predicted to grow significantly, with DLC solutions projected to account for at least 15% of all data center installations in the next two years, a substantial increase from the previous level of less than 1%. Supermicro is positioned as a frontrunner in providing DLC solutions, which may lead to a rise in demand for its AI servers.
The financial district anticipates that Supermicro will increase its adjusted earnings by 41% each year until fiscal year 2026. This suggests that the current valuation of 25.7 times adjusted earnings is considered inexpensive. However, if Supermicro fails to meet Wall Street’s earnings projections in the upcoming quarters, the stock price could drop significantly.
Investors willing to take on this risk may consider purchasing a small amount of the investment now, but they should not anticipate seeing their investment triple in value within the next year. While this possibility exists, relying on such an outcome is setting oneself up for disappointment.
