5 Artificial Intelligence (AI) Hardware Stocks — Not Named Nvidia — That Are

Semiconductor stocks have taken off big-time in the past year. The PHLX Semiconductor Sector index gained an impressive 51% during this period thanks to the booming chip demand triggered by the growing adoption of artificial intelligence (AI) applications.

Semiconductors play a central role in the AI revolution. The training of AI models such as OpenAI’s ChatGPT was made possible using chips designed by the likes of Nvidia (NASDAQ: NVDA). This explains why Nvidia’s AI-focused graphics processing units (GPUs) have been selling like hotcakes over the past 18 months, leading to a sharp jump in Nvidia’s revenue and earnings.

The market rewarded Nvidia handsomely for its stellar growth. That’s evident from the 225% jump in the company’s stock price in the past year. It won’t be surprising to see Nvidia maintain its outstanding momentum as well thanks to expectations of strong top- and bottom-line growth. However, Nvidia is not the only company in the hardware supply chain driving the AI revolution.

Here’s a closer look at five other names playing a central role in the AI hardware market.

These server manufacturers are winning big from AI adoption

While the likes of Nvidia, Intel, and Advanced Micro Devices make or design chips that are used for addressing AI workloads such as training large language models (LLMs) and for inferencing purposes, those chips need to be mounted on a server infrastructure that’s specifically designed for running AI workloads. Dell Technologies (NYSE: DELL) and Super Micro Computer (NASDAQ: SMCI) are two names benefiting big-time from the growing need for AI-optimized servers.

While shares of Dell have jumped 184% in the past year, Supermicro stock has rocketed higher, with eye-popping gains of 847%. Despite these massive jumps, both stocks still trade at attractive multiples. Dell has a sales multiple of just 0.9, while Supermicro’s reading stands at 5.6. Their sales multiples are lower than the Nasdaq-100 Technology Sector index’s average price-to-sales ratio of 7.3.

Story continues

A closer look at how AI drives their growth will demonstrate why investors bought their stocks hand over fist in the past year. It also explains why they are still worth buying. Dell, for instance, is set to return to growth in the current fiscal year after struggling in the previous one because of weak personal computer (PC) sales.

Its top line fell 14% in fiscal 2024 (which ended on Feb. 2, 2024) to $88.4 billion. Dell has guided for $93 billion in revenue in the current year at the midpoint of its guidance range, and the demand for AI servers is one of the reasons behind its turnaround. Dell shipped $800 million worth of AI-optimized servers last quarter. Even better, its AI server backlog almost doubled quarter over quarter to $2.9 billion thanks to a 40% sequential increase in AI server orders.

The good part is that Dell’s AI server order book could keep getting fatter. The AI server market is set to grow from an estimated $30 billion last year to $150 billion in 2027, according to Foxconn. This is precisely the reason why even Super Micro Computer stock has turned out to be a stock market favorite in the past year.

Supermicro’s growth has been stunning with its revenue in the ongoing fiscal year 2024 set to double to $14.5 billion from $7.1 billion in fiscal 2023. More importantly, the server manufacturer claims that its production capacity is solid enough to support more than $25 billion in annual revenue. This explains why analysts have significantly raised their revenue estimates for the next couple of years. However, it won’t be surprising to see the company crushing those expectations thanks to its capacity expansion moves.

Memory and custom chips also saw a robust AI-driven boom

Memory chips from the likes of Micron Technology (NASDAQ: MU) are helping Nvidia manufacture powerful AI GPUs. This explains why Micron sold out its entire 2024 capacity of high-bandwidth memory (HBM) chips that are deployed in AI chips, while also allocating an “overwhelming majority” of its HBM production line for next year.

HBM is deployed to increase the speed at which data is fed to AI processors, significantly boosting the performance of AI processors. This explains why Nvidia and AMD have been packing more HBM into their AI chips, driving impressive growth for Micron. The memory specialist’s revenue was up 58% year over year last quarter to $5.8 billion. It is expecting stronger growth of 76% in revenue in the current quarter to $6.6 billion from $3.75 billion in the year-ago quarter.

Analysts expect Micron to finish the year with a 57% spike in revenue to $24.3 billion followed by another impressive year in fiscal 2025 with an estimated revenue jump of 42%. With shares of Micron currently trading at 6.4 times sales despite rising 95% in the past year, buying it looks like a smart thing to do as the HBM market could generate $49 billion in…