AI technology stocks, including Nvidia (NASDAQ: NVDA), performed exceptionally well in 2023. Three “Nvidia-adjacent” companies – AI accelerator competitor Advanced Micro Devices (NASDAQ: AMD), server-maker partner Super Micro Computer (NASDAQ: SMCI), and big data software platform Palantir (NYSE: PLTR) – each delivered remarkable gains of 127.6%, 246.2%, and 167.4%, respectively, according to data from S&P Global Market Intelligence.
Super Micro Computer’s astronomical ascent, even surpassing Nvidia’s gain in 2023, bears testament to a thriving AI-centric environment. How did these three entities achieve their remarkable performance, and what’s on the horizon for them in 2024?
Partners, Competitors, and Users of Nvidia’s Hopper AI Accelerators
Artificial intelligence emerged as a dominant force in the past year. The introduction of OpenAI’s ChatGPT chatbot in November 2022 stoked the fire of an AI supremacy arms race, subsequently leading to significant revenue growth for Nvidia in May 2023.
This pivotal event propelled the share prices of several industry participants, including Super Micro Computer, which has been a close partner of Nvidia since their respective 1993 inceptions. Founder and CEO Charles Liang has strategically positioned Super Micro in the server industry, traditionally considered commoditized. The company’s unique approach of assembling servers from reusable components has proven lucrative, especially with the surge in demand for energy-efficient server design in the AI data center landscape. Consequently, Super Micro witnessed a 37% revenue surge in the fiscal year ending in June 2023. With a projected 40%-plus growth for 2024, the company’s valuation has soared from around 8 times to 32 times earnings, alluding to its promising AI-fueled trajectory.
Image source: Getty Images.
In the wake of Nvidia’s meteoric rise, market players contemplated the potential challengers to its AI supremacy, eventually looking to AMD. Despite a 55% slump in 2022, AMD’s resurgence was buoyed by amplified AI enthusiasm in the latter half of 2023. The unveiling of its MI300 AI accelerator in June, with unique properties like a 12-part “chiplet” architecture and enhanced memory capacity, kindled investors’ optimism. CEO Lisa Su’s confirmation that the MI300 began shipping in the fourth quarter, along with a projected $400 million revenue for Q4 and over $2 billion for 2024, added fuel to the fire. While AMD’s AI revenue is dwarfed by Nvidia’s, the swift embrace of the MI300 implied a potential foothold for AMD in the burgeoning $400 billion AI accelerator market projected for 2027.
Palantir commenced the year following a tumultuous two-year downturn, having experienced a 65% decline in 2022. Nevertheless, the company’s unexpected embrace of generally accepted accounting principles (GAAP) profitability throughout 2023, demonstrating robust operating leverage, reassured investors of its capacity to generate substantial profits. Notably, Palantir achieved GAAP net income profitability over four consecutive quarters, positioning the company for potential inclusion in the S&P 500 index. Founded in 2003, Palantir’s foray into commercial big data applications, leveraging data analytics, machine learning, and generative AI in various sectors, bolstered investor confidence in its AI prospects.
Can these Stocks Replicate Their 2023 Feat in 2024?
While expecting a repeat performance in 2024 may be a tall order, the AI revolution could mirror the multiyear growth saga of the internet revolution from 1995 to 1999, where select entities experienced substantial, sustained ascents.
Super Micro Computer Sees Growth in Hardware Sector
Hardware’s Prospects Amidst Uncertainty
Super Micro Computer and Advanced Micro Devices (AMD) have been making waves in the hardware sector. With generative AI technology continuing to evolve, the space is rife with speculation about its potential impact on businesses. As companies like Palantir and others tinker with machine learning, data analytics, and automation software, the role of generative AI remains a mystery. Will it foster innovation or commoditize offerings, giving rise to more competition?
The Competitive Landscape in Hardware
Competition in the hardware industry is intense, there’s no doubt about it. Super Micro and AMD are right in the thick of it. However, generative AI is likely to bring more growth opportunities for hardware suppliers without necessarily intensifying competition. As long as they maintain their current momentum, Super Micro and AMD are well-positioned for further gains amidst an already competitive landscape.
Investment Considerations
Before considering an investment in Super Micro Computer, it’s important to weigh the potential impact of generative AI on the company’s future prospects. Despite the positive outlook for hardware suppliers, it’s essential for investors to conduct their due diligence and delve into the implications of this emerging technology.
According to The Motley Fool Stock Advisor, Super Micro Computer did not make it onto their list of the top 10 stocks for investors to buy. The discussion covers the potential for significant returns from the selected stocks, providing a compelling perspective on the current investing landscape. The Stock Advisor service has showcased impressive performance, significantly outperforming the S&P 500 since 2002*.
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