Nvidia One of the hottest artificial intelligence (AI) stocks on the market in 2023 has more than tripled its revenue and earnings growth thanks to the way AI has boosted its earnings growth.
However, Nvidia isn’t the only stock to gain from the spread of artificial intelligence. Shares of Super microcomputer (SMCI 0.43%) They have increased by 208% with Nvidia’s return in 2023.
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The good part is that Super Micro Computer’s stock is very affordable despite its dramatic rise. It currently trades at less than 2x sales, while a trailing multiple of 22 looks like a bargain given its growth rate. Additionally, Super Micro’s forward earnings multiple of 7 represents a huge jump in the company’s profits.
By comparison, Nvidia has a rich sales multiple of 35 and trades at 110 times trailing earnings. Although the forward earnings multiple of 55 represents a strong increase in earnings, it is still on the expensive side compared to Super Micro. All of this makes it a no-brainer to buy Super Micro stock right now, especially given how fast it’s growing.
Super Micro Computer once again delivers good results
Super Micro released results for the first quarter of fiscal 2024 (for the three months ended September 30) on November 1. The company’s revenue rose 15 percent from a year ago to $2.12 billion, beating the $2.05 billion it had forecast. The midpoint of its guidance range was Super Micro’s adjusted earnings of $3.43 per share at the higher end of its guidance range of $2.75 per share to $3.50 per share.
The company’s top and bottom lines were ahead of consensus estimates. More importantly, Super Micro also provided complete guidance. It expects fiscal second-quarter revenue of $2.8 billion to be at the midpoint of its guidance range, while non-GAAP (adjusted) earnings could reach $4.64 per share. Analysts expected $4.11 per share on revenue of $2.55 billion.
Super Micro’s guidance shows that its top line is on track for impressive 55% year-over-year growth. Top-line growth will also be flat, as the company delivered $3.26 per share in adjusted earnings during the same period last year. This tremendous acceleration in Super Micro’s growth can be attributed to strong demand for the company’s modular, high-performance, low-power server solutions, which are gaining traction among customers like Nvidia thanks to the AI boom.
According to CEO Charles Liang, “During the first quarter, demand for our leading AI platforms at rack-and-play scale, particularly for LLM-optimized NVIDIA HGX-H100 solutions, was a key driver It was growth.”
Liang added that customers are turning to their own server solutions to reduce energy costs, overcome energy constraints and overcome thermal challenges caused by AI servers. Even better, Super Micro claims that its customers have “been able to double the AI computing capacity of their data center” with its solutions, which are able to reduce energy consumption requirements.
In fact, demand for Super Micro’s offerings is so high thanks to the growth of productive AI workloads that the company’s orders are growing faster than it anticipated. As a result, the company is now strongly focused on increasing its production capacity by 25% to meet the booming end market demand.
The hot stock rally is here to stay
Demand for AI servers has simply dropped this year, which has positively impacted Super Micro’s performance. Market research firm TrendForce estimates that AI server shipments could increase by 38 percent this year. By 2026, shipments of AI servers will grow at a CAGR of 22% through 2026, indicating that Super Micro’s business is enjoying healthy growth.
Not surprisingly, the company says its fiscal second quarter guidance is a “very conservative number.” Additionally, Super Micro raised its annual revenue guidance to a range of $10 billion to $11 billion, up from its previous forecast of $9.5 billion to $10.5 billion. However, management says even the upgraded guidance is on the conservative side.
The midpoint of the new guidance suggests that Super Micro’s full-year revenue could rise at least 48%. That’s significantly higher than the 36 percent revenue growth the company posted in fiscal 2023. So it will not be surprising to see these AI stocks maintain their outstanding momentum in the market and bring more profits to investors, which is why those who take refuge in them. I bought the Super Micro but given its attractive valuation you might want to do so right away.
Harsh Chauhan has no position in any of the listed stocks. The Motley Fool has positions and recommends Nvidia. The Motley Fool recommends the Super Micro Computer. The Motley Fool has a disclosure policy.
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