Nvidia (NASDAQ: NVDA) The company added to its first-half earnings, gaining about 150% after already rising 1,300% over the past five years. The company dominates the AI chip market, with an 80% share, and sells a variety of related products and services to companies launching AI projects. That has driven growth, with earnings advancing in the triple digits quarter after quarter.
But as impressive as that was, Nvidia wasn’t the best performer in the first half of the year. The chipmaker was outperformed by another stock, which surged 188%. That company, which also works in artificial intelligence and saw its earnings soar — and that company is already benefiting from the growth of Nvidia and other chip designers.
Can Nvidia’s market-beating stock give investors an even better performance in the second half of the year? Let’s find out.
AI Data Center Service
The player who has recently impressed the market has actually been around for a long time – more than 30 years to be exact. I’m talking about supercomputer (NASDAQ: SMCI)a manufacturer of servers, workstations, complete rack solutions, and other equipment that are critical to AI data center operations. Supermicro’s revenue has gradually grown over the years, but Artificial Intelligence Boom This was a clear turning point, helping sales and net income rise significantly.
Earlier this year, Supermicro reported first-quarter revenue of $3 billion — the company’s annual revenue level through 2021.
Supermicro has benefited from demand for top-of-the-line AI chips because customers generally don’t just need a chip, they need a variety of hardware—and the company integrates those chips into its products. So when Nvidia or Intel CorporationFor example, if Supermicro launches a new chip, this creates demand for its products as well. To make the most of it, Supermicro works closely with these companies, monitoring their development pipelines so that it can immediately incorporate their innovations into its equipment.
Supermicro’s “block-building” process—most of its products share common parts—also makes it easier to produce equipment tailored to customers’ needs. All of this has helped the company grow five times faster than its industry over the past 12 months.
There is reason to be optimistic that this will continue, as the growth of the AI market is still in its early stages. Analysts expect the market size, which is now $200 billion, to exceed $1 trillion by the end of the decade — and that would translate into sustained demand for supermicro products.
New growth engine
Additionally, Supermicro’s direct liquid cooling (DLC) technology could serve as a new growth engine for the company. AI data centers generate a tremendous amount of heat, and this situation will only get worse as workloads intensify.
But Supermicro’s DLC technology solves that problem, and customers are now taking notice. Supermicro’s DLC solutions, which have gone from zero to less than 1% market share in the company’s 30-year history, could capture 30% share in the next two years. Taipei Times The company said in a statement, quoting CEO Charles Liang.
All of this means that Supermicro’s incredible growth may still be far from over, and in the second half of this year, Nvidia’s release of its game-changing new architecture — Blackwell — and its chip manufacturing equipment could give the manufacturer a fresh boost. Supermicro recently gave a sneak peek at its Blackwell products and says it’s focused on developing new systems for generative AI and improved inference to accommodate the company’s latest market-leading chips.
Can Supermicro beat Nvidia?
Now, let’s get back to our question: Can Supermicro continue to outperform Nvidia and the market in general in the second half of the year? I think it’s very likely that this hardware giant will outperform the market, thanks to its growth prospects and its position in the AI space.
As for overtaking Nvidia, it’s possible. Despite Supermicro’s first-half surge, the company is trading at a significant discount to the chip designer — about 24 times. Future earnings estimates While Supermicro’s five-year EPS growth estimate of 62% beats the average estimate of 46% for Nvidia.
These points could attract investors and help Supermicro rally in the second half of the year. But even if this leading equipment company doesn’t deliver a repeat performance in the coming months, that’s a good thing. Supermicro still has the potential to deliver earnings growth and good stock performance over the long term, which is great news for investors today.
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Adria Cimino The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Nvidia. The Motley Fool recommends Intel and recommends the following options: Buy $45 shares in January 2025 on Intel and Sell $35 shares in August 2024 on Intel. The Motley Fool has Disclosure Policy.
This stock outperformed Nvidia in the first half of the year, can it do it again? Originally posted by The Motley Fool
