OpenAI launched ChatGPT in November 2022, kicking off a surge in artificial intelligence (AI) investments on Wall Street. Notably, Super Micro Computer (SMCI -3.83%) and Nvidia (NVDA -0.08%) are standout performers in the S&P 500 (^GSPC -0.05%).
Over the past two years, Supermicro’s stock rose 650% and Nvidia’s by 1,030% due to high demand for AI infrastructure, leading both to execute 10-for-1 stock splits.
Investors remain optimistic as companies continue to build AI infrastructure, with price targets from The Wall Street Journal suggesting potential gains:
- Supermicro’s average price target is $67.50, representing a 41% upside from its current price of $48.
- Nvidia’s target is $150, implying a 7% upside from its current $140.
1. Super Micro Computer
Super Micro Computer creates AI-optimized servers and equipment, focusing on rapid product development in Silicon Valley. This allows them to launch new products faster than competitors.
Analyst Hans Mosesmann noted that Supermicro has a strong time-to-market advantage. The AI server market is projected to grow at 30% per year until 2033.
In Q4 2024, Supermicro’s revenue soared 143% to $5.3 billion, but their gross margin fell to 11.2%. Investors should note potential regulatory risks as the company faces scrutiny for past accounting practices.
2. Nvidia
Nvidia is seen as essential for AI, holding over 80% market share in AI accelerators. Its strong software ecosystem and recent acquisition of Mellanox bolstered its market position.
With a projected 54% increase in adjusted earnings over the next year, Nvidia’s current valuation seems reasonable. It’s suitable for patient investors to consider a small investment.
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