Nvidia Is Getting Outperformed by Super Micro Computer Stock — Should You Invest?

Nvidia (NVDA)

Super Micro Computer has gone from an obscure server maker to a company worth over $60 billion. Shares have skyrocketed around 258% in 2024, which beats client Nvidia (up just 87% this year), and it even replaced Whirlpool in the S&P 500 on March 18.

Many analysts feel that’s more room for growth as the field of AI continues to grow rapidly with innovations as new applications are constantly being introduced.

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With the company recently joining the S&P 500, we will analyze Super Micro Computer stock and consider what the future may hold.

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What Happened With Super Micro Computer Stock?

The company has been around for over 30 years, specializing in high-end servers. However, the release of the revolutionary ChatGPT tool in late 2022 sparked a boom in the field of AI, with Super Micro becoming one of the main beneficiaries. In the fourth quarter of 2023, revenue more than doubled to $3.66 billion. Analysts expect that sales could triple in the current quarter.

Since the company produces servers and specializes in AI computing, it has seen tremendous revenue growth. While Nvidia produces high-quality graphics processing units (GPUs), Super Micro is responsible for the servers that the GPUs are put into. Many larger tech firms don’t have the staff required to design these computing solutions, so they rely on Super Micro’s customized solutions.

As the primary vendor for Nvidia, the increased demand for computing solutions for AI applications has led to surging sales for the servers that utilize these GPUs.

Rapid Stock Growth

You can’t write about Super Micro without discussing its phenomenal share price growth. The shares shot up 87% in 2022, during one of the worst years for the tech industry, and then 246% in 2023.

Sales and profits have soared for the company in the last few years, causing the stock price to grow rapidly. When 2022 ended, the company’s market cap was around $4.5 billion, and it’s now at around $60 billion.

Should You Invest In Super Micro Computer Stock?

If you’re thinking about investing in the server maker to capitalize on the increased demand for AI applications, here are a few considerations.

Analysts See Room for Growth 

Despite the fact that the stock has already nearly tripled in 2024, analysts from J.P. Morgan believe there’s more room for growth. They estimate that the revenue opportunity could reach $40 billion in the fiscal year of 2028. With expectations for revenue growth from $7.1 billion in fiscal 2023 all the way to possibly $40 billion, they have set a stock price target of $1,150. The stock price closed at $1,023.29 on March 27.

Earnings Report

Super Micro Computer will report earnings on May 2 and analysts will be watching to see whether the rally will keep up based on sales expectations that are projecting a 200% revenue growth for the quarter. The company expects the revenue to fall between $3.7 billion and $4.1 billion, with a full-year revenue range between $14.3 billion and $14.7 billion.

If the strong demand impacts the average selling prices, sales should continue increasing. As the server maker introduces new products and expands its customer base, there’s potential for continued exceptional financial results.

The Advancement of AI-Powered Tools

Since the server maker has become a leading AI infrastructure solutions provider, management predicts that the AI boom will continue for the foreseeable future. As the demand for AI computing increases, Super Micro plans to double its AI portfolio with new platforms. The company also will increase its manufacturing capacity by adding two new production facilities and warehouses.

As companies focus on launching and scaling data centers for AI applications, the demand for customized server solutions should increase. As a key supplier to Nvidia, the future financials look promising.

Growth Could Be Factored In

Some analysts feel that the growth already could be factored into the stock price, based on some of the recent rallies as the stock has become more expensive. Future success also will depend on the ability to introduce new products as technology changes. The server maker also could have to increase spending on research and development, which could hurt the profit margins.

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This article originally appeared on GOBankingRates.com: Nvidia Is Getting Outperformed by Super Micro Computer Stock — Should You Invest?