Nvidia and Super Micro Computer have recently become top performers in the Nasdaq 100 and the S&P 500, respectively, driven by their roles in artificial intelligence (AI). Both companies have elected to split their stocks to make shares more accessible. Nvidia completed a 10-for-1 stock split in June, and Super Micro Computer (Supermicro) is set to do the same in September. Despite their impressive performance, Wall Street analysts are still optimistic, with some predicting massive returns on the horizon.
Beth Kindig of the I/O Fund has valued Nvidia at $10 trillion by 2030, while Jim Cramer echoed this sentiment two years ago. This suggests a potential upside of 245% from Nvidia’s current market cap of $2.9 trillion. Meanwhile, Ananda Baruah at Loop Capital has forecasted a 165% gain for Supermicro over the next 12 months, implying a price target of $1,500 per share, up from its current value of $567.
Here’s what investors need to know about these two AI-driven stocks:
Nvidia
Nvidia initially made its name with graphics processing units (GPUs) designed for video games and 3D applications. However, the company saw the potential for these GPUs in other industries, especially data centers. Nvidia’s parallel computing platform CUDA, launched in 2006, revolutionized how companies could harness the power of GPUs for tasks such as computational chemistry and AI.
Today, Nvidia dominates the data center accelerator market, with a staggering 98% share of data center GPU shipments in 2023, according to TechInsights. Additionally, Nvidia holds over 80% of the AI processor market, and its GPUs consistently outperform competitors’ products in AI benchmarks.
One of Nvidia’s biggest strengths is its comprehensive full-stack computing solution. This means Nvidia provides everything a business needs to build, deploy, and manage AI applications—from GPUs and CUDA to networking hardware, CPUs, and its AI-as-a-service platform, DGX Cloud.
The company has experienced tremendous financial growth. In the first quarter of fiscal 2025 (ended April 2024), Nvidia’s revenue soared by 262% to $26 billion, driven primarily by its data center segment. Non-GAAP net income jumped 461% to $6.12 per diluted share. CEO Jensen Huang noted that the company’s growth is largely due to the growing demand for generative AI training and inference on the Hopper platform.
Looking forward, analysts predict that Nvidia’s earnings will continue to grow at a rate of 52% annually through fiscal 2026, which makes its current valuation of 57.7 times adjusted earnings reasonable. Investors looking to buy into Nvidia should consider starting with a small position now, with the possibility of increasing it if the stock dips after the upcoming earnings report on August 28. Although Nvidia could potentially reach a $10 trillion valuation, it’s uncertain whether it will hit that milestone by 2030.
Super Micro Computer (Supermicro)
Supermicro designs and manufactures high-performance computing platforms, including servers and storage solutions optimized for AI and data analytics. The company is a leader in the AI server market, thanks to its modular approach to product design and its internal manufacturing capabilities.
Supermicro distinguishes itself by offering a vast array of server configurations through its “electronic building blocks” approach, which allows for almost endless combinations. This sets it apart from competitors that offer more limited options. Additionally, Supermicro’s in-house research, development, and assembly operations in Silicon Valley enable it to roll out new products quickly, integrating the latest technology from suppliers like Nvidia.
In the fourth quarter of fiscal 2024 (ended June 30), Supermicro reported mixed results. While revenue surged 143% to $5.3 billion, driven by strong demand for AI infrastructure, non-GAAP net income rose by a more modest 78% to $6.25 per diluted share, as margins were pressured by costs associated with direct liquid cooling (DLC) components. This shortfall caused the stock to drop 17%.
Despite this, Supermicro’s CFO David Weigand reassured investors that gross margins should stabilize between 14% and 17% by the end of fiscal 2025, as DLC manufacturing capacity increases. Furthermore, investments in DLC technology could help Supermicro gain more market share in AI servers. DLC components reduce data center power consumption, and demand for these solutions is expected to rise sharply, with projections showing that DLC could represent 15% of data center installations in the next two years.
Wall Street expects Supermicro’s earnings to grow at an annual rate of 41% through fiscal 2026. With a current valuation of 25.7 times adjusted earnings, the stock appears attractively priced. However, there’s still risk involved—if Supermicro misses earnings estimates in future quarters, its stock could decline further. For investors willing to accept this risk, purchasing a small position could be worthwhile, although it’s important not to expect triple-digit gains within the next year.
Final Thoughts
Both Nvidia and Supermicro present compelling opportunities for investors, especially with their roles in the AI revolution. While Wall Street analysts predict significant upside for both companies, potential investors should approach with caution, especially given the volatility that comes with such high-growth stocks. However, for those willing to take on some risk, these AI-focused companies could offer substantial long-term rewards.
