This super cheap AI stock is rising like Nvidia, and it’s a stark buy

This super cheap AI stock is rising like Nvidia, and it’s a stark buy

Nvidia It was one of the hottest artificial intelligence (AI) stocks on the market in 2023, with its shares more than tripling thanks to the way AI fueled its revenue and earnings growth.

However, Nvidia isn’t the only stock to gain big from the spread of AI. shares Super micro computer (SMCI 0.43%) Nvidia’s revenues were matched in 2023 with a gain of 208%.

NVDA chart

NVDA data by YCharts

The good part is that Super Micro Computer stock is still incredibly affordable despite its astonishing rise. It’s trading at less than 2x sales at the moment, while a trailing earnings multiple of 22 looks like a bargain given how fast it’s growing. Moreover, Super Micro’s forward earnings multiple of 7 indicates a significant jump in the company’s bottom line.

For comparison, Nvidia has a rich sales multiple of 35 and trades at 110 times trailing earnings. Although its forward earnings multiple of 55 indicates a sharp increase in earnings, it is still on the expensive side compared to Super Micro. All of this makes buying Super Micro shares a no-brainer right now, especially given the healthy pace at which they’re growing.

Super Micro Computer delivers strong results once again

Super Micro released its first-quarter fiscal 2024 results (for the three months ended September 30) on November 1. The company’s revenue increased 15% year over year to $2.12 billion, higher than the $2.05 billion revenue it had expected last year. The middle of its steering range. Super Micro’s adjusted earnings of $3.43 per share hit the high 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. Importantly, Super Micro has provided strong guidance as well. It expects fiscal second-quarter revenue of $2.8 billion at the midpoint of its guidance range, while non-GAAP (adjusted) earnings could reach $4.64 per share. Analysts would have settled for $4.11 per share earnings on revenue of $2.55 billion.

Super Micro’s guidance indicates that its top line is on track to jump an impressive 55% year over year. Net income growth is set to be strong as well, with the company generating adjusted earnings of $3.26 per share in the same period last year. This impressive acceleration in Super Micro’s growth can be attributed to strong demand for the company’s modular, high-performance, energy-efficient server solutions, which are finding traction with customers like Nvidia thanks to the AI ​​boom.

According to CEO Charles Liang, “During the first quarter, demand for our leading large-scale plug-and-play AI platforms, especially for LLM-optimized NVIDIA HGX-H100 solutions, was the primary driver of growth.”

Liang added that customers are turning to its server solutions to reduce energy costs, overcome power limitations, and overcome thermal challenges posed by AI servers. Better yet, Super Micro claims that its customers have been able to “double the AI ​​computing capacity of data centers” with its solutions that are able to lower power consumption requirements.

In fact, demand for Super Micro’s offerings is so strong thanks to growth in generative AI workloads, that the company’s orders have grown faster than expected. As a result, the company is now strongly focused on increasing its production capacity by 25% to meet the booming end market demand.

The stock’s hot rally is here to stay

Demand for AI servers has risen this year, and this has positively impacted Super Micro’s performance. Market research firm TrendForce estimates that AI server shipments could jump 38% this year. Through 2026, AI server shipments could increase at an annual rate of 22% through 2026, indicating that Super Micro’s business is set to enjoy healthy growth.

Not surprisingly, the company says its financial guidance for the second quarter is a “very conservative number.” Furthermore, Super Micro raised its full-year revenue guidance to a range of $10 billion to $11 billion, compared to its previous forecast of $9.5 billion to $10.5 billion. However, the administration says that even the updated guidance is on the conservative side.

The midpoint of the new guidance suggests that Super Micro’s full-year revenue could increase by at least 48%. That would be much higher than the company’s 36% revenue growth in fiscal 2023. So it wouldn’t be surprising to see this AI stock maintain its outstanding momentum in the market and deliver more gains to investors, which is why those of you who haven’t bought Super Micro but may like In doing so immediately, due to its attractive price.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions on and recommends Nvidia. The Motley Fool recommends the Super Micro Computer. The Motley Fool has a disclosure policy.

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