Who is the real hegemon of the AI stock market? Nvidia tripled, and ultra-microcomputers soared 474%!

Nvidia (NASDAQ: NVDA) and Super Micro Computer (NASDAQ: SMCI) have performed well in the stock market over the past year, and have experienced significant growth in revenue and earnings thanks to growing demand for artificial intelligence (AI) hardware.

Nvidia's stock price has more than tripled in the past year, and Super Micro's increase has reached an astonishing 474%. The two companies are expected to maintain this strong growth momentum in the future. But if you had to choose between these two AI-related stocks to invest in right now, which one would you choose? Let's find out.

Nvidia is boosting the widespread adoption of artificial intelligence (AI) technology with its graphics cards. The company's graphics processing units (GPUs) have excellent parallel computing capabilities, enabling customers to train complex artificial intelligence models, such as large language models (LLMs), and apply these models to solve real-world problems.

Customers around the world are using Nvidia hardware to enhance their AI capabilities, which has enabled Nvidia to occupy more than 90% of the market share in the rapidly growing AI chip market. Meanwhile, Nvidia's rivals are far behind. For example, Advanced Micro Devices recently said it expects sales revenue of its AI graphics cards to reach $4 billion in 2024.

Meanwhile, Intel expects sales revenue of its AI accelerators to reach 500 million US dollars in the second half of 2024. By contrast, in the 2024 fiscal year that just ended, Nvidia's data center revenue was as high as $47.5 billion, three times the previous year's revenue.

Overall, thanks to its solid product roadmap, Nvidia's leading position in the data center chip market is increasingly consolidated. The company's recently launched next-generation Blackwell B200 GPU is expected to be four times faster in terms of AI training speed than the current top product, the H100, and up to 30 times faster in terms of AI inference. This trend is expected to continue.

Nvidia's H100 video card has been hugely successful, and it's no surprise to see that its next generation products help the company continue to lead in this field. The company's revenue from AI chip sales is expected to grow significantly in the next few years. As a result, it's understandable that Nvidia's revenue expectations for the next three fiscal years have increased significantly recently.

Nvidia recorded an all-time high of $60.9 billion in fiscal year 2024. The chart shows that its total revenue is expected to increase nearly 2.7 times over the next three years. Over the past five years, Nvidia's average sales multiplier was 18.7. If this multiple is maintained over the next three years, its market capitalization could exceed $3 trillion, up 35% from current levels. Currently, Nvidia's transaction price is 36 times its sales.

Therefore, even if the valuation is lowered over the next three years, it is likely to bring significant room for growth. However, given Nvidia's leading position in the AI chip market, which is expected to grow by more than 36% each year, it should be no surprise to see Nvidia enjoy a high premium by the end of this decade.

Like Nvidia, Super Micro Computer is also an important player in the AI chip market. Unlike Nvidia, Super Micro focuses on the production of artificial intelligence server products equipped with graphics cards from companies such as Nvidia.

Super Micro plays a key role in the AI server market, and the company derives more than half of its revenue from AI server sales. Over the past year, Super Micro's total revenue reached $11.8 billion. Assuming that half of that revenue comes from artificial intelligence server products, its revenue in this market should be $6 billion.

Last year, the total value of the AI server market was estimated at $12 billion, which means that Super Micro probably occupied half of the market.

Looking ahead, analysts expect the global AI server market to reach 50 billion US dollars in annual revenue by 2029, with a compound annual growth rate of 26%. Compared to the overall market, Super Micro is growing much faster.

This can be clearly seen from the company's results for the third quarter of fiscal year 2024. In the quarter, Super Micro's revenue tripled year over year to $3.85 billion. The company also raised its performance forecast for the full year, and now expects total revenue for the 2024 fiscal year to reach US$14.9 billion, an increase of 110% over last year.

As a result, Super Micro is expected to have a larger share of the AI server market. That's why analysts have raised their growth expectations for the company significantly, as shown in the chart below.

The chart above shows that Super Micro's revenue is expected to nearly double within the next two years.

If the company can achieve revenue of $27 billion in a few years and maintain its current price-to-sales ratio of 3.8, its market value could rise to $103 billion, an increase of 124% from current levels. In this context, we can check it through the BiyaPay App, a multi-asset trading wallet: use BiyaPay to search its code SMCI, regularly monitor stock trends, and trade online in real time.

You can also deposit digital currency (U) to BiyaPay, then withdraw fiat money to other securities to invest in US stocks. At the same time, BiyaPay has also been authorized by the US Securities Regulatory Commission, so investors can buy this growth stock with confidence.

Notably, Super Micro's sales multiplier is far lower than Nvidia, and its stock price is also below the US tech industry average sales multiplier of 6.8. Therefore, if the market gives Super Micro a higher valuation multiple, its growth potential will be even more significant.

All signs suggest that Super Micro Computer's stock may have more potential to grow than Nvidia. Also, judging by the sales multiples of the two, Super Micro is priced far below Nvidia. Also, analysts predict that Super Micro's earnings will grow significantly faster than Nvidia's.

The AI server maker's profit is expected to grow at a rate of 62% per year over the next five years, which will significantly exceed Nvidia's projected 35% annual growth rate during the same period. Therefore, for investors considering choosing between these two AI stocks, buying Super Micro stock is a good choice given Super Micro's attractive valuation and excellent growth performance.

Article Source: Nasdaq

Editor: BiyaPay Finance