We recently published a list of 17 Latest AI News and Analyst Ratings You Shouldn’t Miss. In this article, we take a look at the position of Super Micro Computer, Inc. (NASDAQ:SMCI) compared to other AI stocks that are currently in the sights of hedge funds.
It’s no surprise that companies in the US and China are leading the world in artificial intelligence. Conservative estimates of the impact of AI on the global economy by market experts at consulting firm PwC show that AI-related profits of almost $11 trillion will account for almost 70% of the total global economic impact by 2030. In China, AI is expected to contribute to a nearly 26% increase in GDP within the next six years, while in the US this figure is likely to be 15%. AI undoubtedly represents the largest commercial investment opportunity in this fast-moving global economy.
Smart companies are seizing this opportunity. According to market research firm IDC, investment in AI infrastructure will exceed $30 billion this year and is expected to grow to $47 billion by 2028. This represents about 30% of total global spending on AI. One of the most prominent use cases for AI is customer service, where global companies have spent more than $16 billion in 2024 so far. The impact of these investments in AI will be significant in the future. AI is expected to contribute to a $15 trillion increase in the global economy by 2030, 14% more than it currently spends.
Like other sectors of the economy, Wall Street is familiar with AI. ChatGPT’s debut in November 2022 marked the beginning of the AI revolution in finance. Since then, revenues from software, hardware and services for AI systems have grown rapidly and will surpass $400 billion in 2027, according to the International Monetary Fund (IMF). Financial sector spending is likely to double to nearly $100 billion by 2027, with an average annual growth rate of nearly 30% – the fastest of the Big Five industries. Hedge funds, often the pioneers of cutting-edge technology, are also embracing generative AI.
Our methodology
For this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular with hedge funds. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (read more details here).
A team of technicians in a server room tests and manages the latest server solutions.
Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of hedge fund owners: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) designs and manufactures high-performance server and storage solutions based on modular and open architecture. As investment in AI infrastructure increases, the company is benefiting from increased orders for memory and storage products. In the fourth quarter of fiscal 2024, the company reported 143% year-over-year growth and generated revenue of $5.3 billion. The company, which specializes in server solutions for the advanced computing needs of AI, was added to the S&P 500 earlier this year. To be included in this list, a company must post four consecutive quarters of positive earnings. The inclusion shows the financial health of the stock as the AI wave sweeps the market.
Micro Computer, Inc. (NASDAQ:SMCI) expects net sales of $6 billion to $7 billion and GAAP net earnings per share of $5.97 billion to $7.66 in the first quarter of its next fiscal year. The numbers represent a tripling of revenue year-over-year and more than doubling of earnings per share at the midpoint of the forecast, underscoring management’s confidence in the strong growth momentum in the memory and storage space driven by artificial intelligence.
SMCI total 6th place on our list of the best AI stocks to buy. While we recognize SMCI’s potential as an investment, we believe some AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than SMCI but trades at less than 5 times its earnings, read our report on the cheapest AI stock.
READ MORE: Michael Burry is selling these shares And Jim Cramer recommends these stocks.
Disclosure: None. This article was originally published on Insider Monkey.
