Two trending stocks in artificial intelligence (AI) led the S&P500 higher in 2024. As of market close on April 24, Nvidia (NASDAQ:NVDA) And Super microcomputer (NASDAQ:SMCI) had posted year-to-date gains of 61% and 166%, respectively, outperforming all other stocks in the index. Some Wall Street analysts nevertheless predict substantial gains for shareholders over the next year.
Specifically, Rosenblatt’s Hans Mosesmann recently raised his price target on Nvidia to $1,400 per share, implying a 69% upside from the current price of $826 per share. Similarly, Loop Capital’s Ananda Baruah recently raised his price target on Super Micro Computer to $1,500 per share, implying a 91% upside from the current price of $787 per share.
Investors should never focus on forecasts, especially those coming from individual analysts, but Nvidia and Supermicro deserve a closer look.
Nvidia: a gain of 61% since the start of the year
Nvidia specializes in accelerated computing, a discipline that uses specialized hardware and software to accelerate complex data center workloads such as 3D simulations, visualizations and artificial intelligence. Nvidia dominates the data center accelerator market with its invention of the graphics processing unit (GPU) in 1999 and subsequent launch of the CUDA programming model in 2006.
While GPUs were initially designed to accelerate graphics workloads, CUDA allows developers to unleash their parallel processing capabilities for other applications. Ultimately, this innovation took Nvidia to the top of the supercomputer accelerator market. According to analysts, the company accounted for 98% of data center GPU sales and 92% of generative AI processor sales last year.
The CUDA ecosystem has grown over the years, so developers can now create all kinds of GPU-accelerated applications. Additionally, Nvidia now sells subscription software and cloud services built on CUDA. For example, Nvidia AI Enterprise is a software platform that streamlines the development of AI applications in various use cases, from recommendation systems in retail to route optimization in logistics to computer vision in robotics.
Nvidia announced exceptional fourth quarter financial results. Revenue rose 265% to $22.1 billion and non-GAAP net income soared 486% to $5.16 per diluted share. This momentum has been fueled by demand for data center products, particularly those related to AI. Additionally, Nvidia said its burgeoning software and services business has grown to $1 billion in annual revenue, showing the company is successfully diversifying beyond GPUs.
Management is targeting revenue growth of 190% in the first quarter. At the same time, the company expects non-GAAP operating expenses to increase only 56%, implying that profits will again grow much faster than revenues. This momentum is bound to slow at some point, but Nvidia is undoubtedly well-positioned to monetize AI.
Wall Street expects Nvidia to increase earnings per share by 35%…
