With the rise in generative artificial intelligence (AI), Nvidia has experienced a surge in stock price, increasing over 200% in the past year as customers scramble to obtain its hardware for these complex applications. However, investors have other options. Advanced Micro Devices (NASDAQ: AMD) and Super Micro Computer (NASDAQ: SMCI) are two companies to consider as excellent ways to invest in this opportunity.
Advanced Micro Devices
Nvidia currently leads the AI-capable graphics processing units (GPUs) industry, holding over 80% market share. However, with high prices and increasing demand, there is a ripe opportunity for competition. In 2024 and beyond, AMD aims to grab a piece of this valuable niche, potentially boosting its long-term growth. CEO Lisa Su anticipates that the $45 billion market for AI chips could expand to $400 billion by 2027. The company has introduced its new MI300 family of GPUs to rival Nvidia’s flagship H100 for AI application training and operation, expecting these products to add around $2 billion to 2024 sales. Although this amount is modest compared to the $20.1 billion earned by AMD over the past 12 months, it could grow to $20 billion in three years if the company maintains a 5% share. With a forward price-to-earnings (P/E) multiple of 48, AMD’s valuation anticipates substantial growth, leaving little room for error. However, the unprecedented surge in AI hardware demand suggests it can meet expectations and continue to outperform.
Super Micro Computer
Having already experienced a 67% increase in 2024, Super Micro Computer seems poised to continue its upward trajectory, rising fivefold in just 12 months. Although the company is no longer as inexpensive as it was at the beginning of last year, it can benefit from the success of its hardware suppliers and its own advancements in data center modernization. Super Micro plays a crucial role in the data center chip industry by converting hardware from companies like Nvidia into consumer-ready computers utilized by enterprises for data storage and the running and training of AI applications. The growing demand for AI chips has bolstered its fortunes, leading management to raise fiscal second-quarter guidance to between $3.6 billion and $3.65 billion from a best-case scenario of $2.9 billion.
Which stock is best for you?
Both Advanced Micro Devices and Super Micro Computer are excellent ways to gain exposure to the AI hardware opportunity, catering to different investment strategies. AMD may offer greater growth potential at a higher price tag, while Super Micro presents a more value-oriented option.
Should you invest $1,000 in Super Micro Computer right now?
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Missed Out on Nvidia? 2 Top Artificial Intelligence (AI) Stocks to Buy Before They Skyrocket was originally published by The Motley Fool
