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Two of the most sought-after artificial intelligence (AI) stocks on Wall Street are NVIDIA Corporation (NVDA - Free Report) and Super Micro Computer, Inc. (SMCI - Free Report) . These top-notch stocks took advantage of the booming AI-empowered hardware market for quite some time, with NVIDIA and Super Micro shares surging 161.5% and 119.4%, respectively, so far this year. In 2023, the stocks rallied more than 200% each.
Image Source: Zacks Investment Research
Notably, the AI-enabled hardware market is well-positioned to surpass $84.9 billion by 2031, at a CAGR of 15.5% from 2024 to 2031, per Skyquest. NVIDIA, in particular, is making the most of the ever-expanding AI-driven chip market, which is poised to be $383.7 billion by 2032, at a CAGR of 38.2% from 2023 to 2032, according to Allied Market Research.
NVIDIA controls the bulk of the AI chip market, which has given the tech behemoth an imposing pricing power. Such dominance has helped NVIDIA post a stunning performance in the fiscal first quarter. Revenues soared a remarkable 262% year over year in the quarter to $26 billion. Earnings per share skyrocketed 461% to $6.12 a share.
NVIDIA is likely to do even better due to the evolving growth avenues in the blossoming AI market. Countries such as Singapore, Japan, France and Italy are investing profoundly in AI infrastructure, which in due course should boost NVIDIA’s top line. Additionally, some prominent companies in India, such as Reliance Industries and Tata Group, are banking on NVIDIA’s chips to train large language models.
What’s more, outlays on AI chips are expected to jump tenfold in the coming years, a blessing in disguise for NVIDIA. Having said that, Super Micro’s business is entangled with chipmakers like NVIDIA, which should certainly boost its share price. After all, Super Micro is one of the major producers of steadfast AI servers needed to mount AI chips that chipmakers sell.
So, in a way, NVIDIA and Super Micro complement each other, and they aren’t competitors. Nonetheless, Super Micro recently concluded its fiscal 2024 and achieved $14.94 billion in sales, up an astounding 110% year over year.
Super Micro is expected to maintain this stellar performance due to healthy demand for AI servers in the next couple of fiscal years. The AI server market is estimated to register a CAGR of more than 18% from 2024 to 2032, added Global Market Insights.
In reality, for quite some time, Super Micro has been growing at a much faster pace than more established players in the server market, like Dell Technologies Inc. (DELL - Free Report) . So, the obvious question is, does it make any sense to buy Super Micro over NVIDIA?
SMCI Has More Room to Run
Both NVIDIA and Super Micro are poised to grow, but Super Micro has more room to grow since it only accounts for nearly 10% of the dedicated AI server market. Consequently, Bank of America Corporation (BAC - Free Report) expects Super Micro’s share in the AI server market to increase to 17% in the next three-year period.
Super Micro, no doubt, has a long-term partnership with NVIDIA. But now, it’s also making dedicated AI servers for Advanced Micro Devices, Inc. (AMD - Free Report) , and this divergence should certainly provide Super Micro more room to scale upward.
SMCI Less Pricey Than NVDA
Super Micro’s shares are less expensive than NVIDIA, which has given the AI server maker an edge over the AI chip maker. After all, buying Super Micro’s shares will burn a smaller hole in your pocket compared to the NVIDIA stock.
This is because, per the Price/Earnings ratio, Super Micro stock currently trades at 18.6X forward earnings. However, the NVIDIA’s forward earnings multiple is 48.3X.
Image Source: Zacks Investment Research
SMCI – A Solid Buy, Very Strong ROE
Super Micro, rightfully, is a better buy than NVIDIA due to more growth potential and lower valuation. SMCI has a Zacks Rank #2 (Buy) at present.
SMCI’s expected earnings growth rate for the current quarter and year is a solid 117.2% and 51.6%, respectively. Its shares have already outperformed the Computer- Storage Devices industry’s gain over the past year (+146.8% vs. +78.5%).
Image Source: Zacks Investment Research
Notable brokerage companies have also jacked up the average short-term price target of SMCI by 45.7% from the server solution provider’s last closing price of $628.80. The analysts’ highest price target is at $1,500.
Image Source: Zacks Investment Research
To top it off, Super Micro has generated profits competently since SMCI has a return on equity (ROE) of 30.6%. Any ROE of more than 20% is generally considered very strong.
Image: Bigstock
The Better AI Stock to Buy Now: NVDA or SMCI
Two of the most sought-after artificial intelligence (AI) stocks on Wall Street are NVIDIA Corporation (NVDA - Free Report) and Super Micro Computer, Inc. (SMCI - Free Report) . These top-notch stocks took advantage of the booming AI-empowered hardware market for quite some time, with NVIDIA and Super Micro shares surging 161.5% and 119.4%, respectively, so far this year. In 2023, the stocks rallied more than 200% each.
Image Source: Zacks Investment Research
Notably, the AI-enabled hardware market is well-positioned to surpass $84.9 billion by 2031, at a CAGR of 15.5% from 2024 to 2031, per Skyquest. NVIDIA, in particular, is making the most of the ever-expanding AI-driven chip market, which is poised to be $383.7 billion by 2032, at a CAGR of 38.2% from 2023 to 2032, according to Allied Market Research.
NVIDIA controls the bulk of the AI chip market, which has given the tech behemoth an imposing pricing power. Such dominance has helped NVIDIA post a stunning performance in the fiscal first quarter. Revenues soared a remarkable 262% year over year in the quarter to $26 billion. Earnings per share skyrocketed 461% to $6.12 a share.
NVIDIA is likely to do even better due to the evolving growth avenues in the blossoming AI market. Countries such as Singapore, Japan, France and Italy are investing profoundly in AI infrastructure, which in due course should boost NVIDIA’s top line. Additionally, some prominent companies in India, such as Reliance Industries and Tata Group, are banking on NVIDIA’s chips to train large language models.
What’s more, outlays on AI chips are expected to jump tenfold in the coming years, a blessing in disguise for NVIDIA. Having said that, Super Micro’s business is entangled with chipmakers like NVIDIA, which should certainly boost its share price. After all, Super Micro is one of the major producers of steadfast AI servers needed to mount AI chips that chipmakers sell.
So, in a way, NVIDIA and Super Micro complement each other, and they aren’t competitors. Nonetheless, Super Micro recently concluded its fiscal 2024 and achieved $14.94 billion in sales, up an astounding 110% year over year.
Super Micro is expected to maintain this stellar performance due to healthy demand for AI servers in the next couple of fiscal years. The AI server market is estimated to register a CAGR of more than 18% from 2024 to 2032, added Global Market Insights.
In reality, for quite some time, Super Micro has been growing at a much faster pace than more established players in the server market, like Dell Technologies Inc. (DELL - Free Report) . So, the obvious question is, does it make any sense to buy Super Micro over NVIDIA?
SMCI Has More Room to Run
Both NVIDIA and Super Micro are poised to grow, but Super Micro has more room to grow since it only accounts for nearly 10% of the dedicated AI server market. Consequently, Bank of America Corporation (BAC - Free Report) expects Super Micro’s share in the AI server market to increase to 17% in the next three-year period.
Super Micro, no doubt, has a long-term partnership with NVIDIA. But now, it’s also making dedicated AI servers for Advanced Micro Devices, Inc. (AMD - Free Report) , and this divergence should certainly provide Super Micro more room to scale upward.
SMCI Less Pricey Than NVDA
Super Micro’s shares are less expensive than NVIDIA, which has given the AI server maker an edge over the AI chip maker. After all, buying Super Micro’s shares will burn a smaller hole in your pocket compared to the NVIDIA stock.
This is because, per the Price/Earnings ratio, Super Micro stock currently trades at 18.6X forward earnings. However, the NVIDIA’s forward earnings multiple is 48.3X.
Image Source: Zacks Investment Research
SMCI – A Solid Buy, Very Strong ROE
Super Micro, rightfully, is a better buy than NVIDIA due to more growth potential and lower valuation. SMCI has a Zacks Rank #2 (Buy) at present.
SMCI’s expected earnings growth rate for the current quarter and year is a solid 117.2% and 51.6%, respectively. Its shares have already outperformed the Computer- Storage Devices industry’s gain over the past year (+146.8% vs. +78.5%).
Image Source: Zacks Investment Research
Notable brokerage companies have also jacked up the average short-term price target of SMCI by 45.7% from the server solution provider’s last closing price of $628.80. The analysts’ highest price target is at $1,500.
Image Source: Zacks Investment Research
To top it off, Super Micro has generated profits competently since SMCI has a return on equity (ROE) of 30.6%. Any ROE of more than 20% is generally considered very strong.
Separately, NVIDIA, at the moment, has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.