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Let’s get down to business. The ability of generative artificial intelligence (AI) to automate certain tasks and increase productivity is gaining attention from businesses everywhere. Generative AI can draft original documents, summarize existing data, create presentations, and even write and debug computer code, and new use cases are being discovered regularly.
Cathie Wood, the enigmatic founder of Ark Investment Management, has focused on disruptive innovation for years, and her views on the potential of generative AI are eye-opening. “AI will enable the most significant productivity gains in our history,” she said. “The productivity gains will be amazing and shocking.”
One of the companies at the center of this long-term tailwind is super microcomputer (NASDAQ:SMCI), also known as super micro. Stocks have ridden the AI wave over the past year, and there could be an even bigger wave ahead.
star server
Supermicro may not be a household name, but over the past year it has quickly emerged as one of the leading providers of servers used in enterprise data centers, cloud computing, and AI systems. The company offers a wide selection of server and storage systems, ranging from complete plug-and-play systems to modular components. Supermicro also provides assistance in installing and upgrading customers’ computing infrastructure.
The company has been developing cutting-edge server and storage systems for more than 30 years. So when an opportunity presented itself in generative AI, Supermicro answered the call.
Supermicro works closely with Nvidia, Advanced Micro Devicesand intelAbove all, we want to ensure that our servers have a steady supply of the latest and greatest AI-centric processors to work seamlessly.
Vast and growing opportunities
AI has been around for decades, but generative AI is the next big advancement in technology. The aforementioned potential for significant productivity gains sets this technology apart from previous technologies. Businesses are also looking to gain an edge, and because it saves time and money, companies of all kinds are looking to get a piece of the pie.
Estimates are around 10 cents, but no one can give you a definitive market size. According to Bloomberg Intelligence, AI generation could grow into a $1.3 trillion market by 2032. A more bullish view can be found in this Ark Invest article. big idea 2024 In this report, Cathie Wood suggests that the AI software market alone could increase spending by $13 trillion by the end of 2020. While the size of the market remains elusive, one thing is clear. That means there’s a lot of opportunity.
blockbuster results
Supermicro’s results help illustrate that opportunity. Supermicro’s net sales for the company’s fiscal second quarter of 2024 (ending December 31) were $3.66 billion, an increase of 103% year-over-year and 73% sequentially. At the same time, adjusted earnings per share (EPS) was $5.59, an increase of 71%. The company noted that record growth was driven by demand for rack-scale systems used for AI.
Management expects the company’s rapid growth to continue. Supermicro expects third-quarter sales to be in the range of $3.7 billion to $4.1 billion. This equates to 205% year-over-year growth at the midpoint of guidance. Earnings are also expected to increase significantly, with adjusted EPS expected to increase 244% to approximately $5.61. The company also raised its full-year revenue outlook to a range of $14.3 billion to $14.7 billion. at least 100%.
“Overall, we’re very confident that this AI boom will continue for many more quarters, if not years,” CEO Charles Liang said, citing continued demand. said.
Supermicro is chasing an addressable market that the company estimates to be worth a total of $25 billion. To meet strong and growing demand, management has begun construction of two new production facilities near the company’s headquarters in Silicon Valley, in addition to the manufacturing facility already scheduled to come online in Malaysia.
attractive opportunity
Supermicrocomputer stocks are growing like wildfire, up 766% in the past year as of this writing. With profits like this, it might be tempting to believe that the stock is quite expensive, but that couldn’t be further from the truth. Despite the parabolic rise, the stock is still trading at just twice next year’s sales, the benchmark for affordable stocks.
Competitive pricing, strong and growing demand for its products, and long-term tailwinds led by AI demonstrate why Supermicro is well-positioned to benefit from this once-in-a-generation opportunity.
Should you invest $1,000 in a super micro computer right now?
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Danny Vena has held positions at Nvidia and Super Micro Computer. The Motley Fool has a position in and recommends Advanced Micro Devices and his Nvidia. The Motley Fool recommends Intel and Super Micro Computers and recommends the following options: A long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, and a short February 2024 $47 call on Intel. The Motley Fool has a disclosure policy.
Once-in-a-generation investment opportunity: 1 artificial intelligence (AI) growth stock to buy now and hold forever Originally published by The Motley Fool
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