Savvy investors know that when a gold rush is underway, buying the stocks of the companies that provide the “picks and shovels” is a proven wealth-building strategy. When it comes to the artificial intelligence (AI) boom, it is the IT infrastructure that makes this revolutionary technology possible. Think chips and computer servers rather than picks and sieves.
If this low-risk investment approach sounds appealing, read on to learn about two leading AI infrastructure providers that have particularly attractive growth prospects. Both of their stocks are attractive buys today.
1. Arm holds
With a staggering 30.6 billion chips shipped in its 2023 fiscal year alone, Arm holds‘ (NASDAQ:ARM) the scope covers almost all technology-driven markets. From personal computers (PCs) and data centers to smartphones and autonomous vehicles, demand for Arm’s energy-efficient devices semiconductor technology is skyrocketing.
Many major chipmakers develop their products using Arm’s architecture. In September, Apple has extended its partnership with Arm, which will allow the tech titan to incorporate Arm’s intellectual property into its custom-designed chips for its popular iPhones and Macs until at least 2040. Microsoft announced that its cloud computing services would offer access to new Arm-based chips. And in March, Nvidia launched its powerful Blackwell high-performance computing platform, powered by Arm processors. In total, Arm estimates that 70% of the world’s population uses products built with its technology.
Additionally, with its chip architecture’s combination of performance, efficiency and cost-effectiveness, Arm is gaining market share in all of its key markets.
This expanding market share is driving strong sales and profit growth for Arm. Revenue rose 14% to $824 million in the quarter ended Dec. 31, while adjusted net income jumped 36% to $305 million.
Increased spending on AI solutions fuels Arm’s growth. “We see demand for Arm technology to enable AI everywhere, from the cloud to edge devices at our fingertips,” CEO René Haas and CFO Jason Child said in a letter to shareholders.
Arm’s sales, in turn, are expected to accelerate. The company expects revenue to increase as much as 42% in its fiscal fourth quarter.
“We believe AI is the most important opportunity of our lifetime, and we’re just at the beginning,” Haas said in an interview with Bloomberg in February.
2. Super microcomputer
Chipmakers aren’t the only ones to benefit from AI gold Rush. Demand for high-performance servers, data storage systems, and other AI-driven IT infrastructure is skyrocketing. Super microcomputer (NASDAQ:SMCI) helps provide its customers with the innovative hardware solutions they need to realize their AI ambitions – and business is booming.
The server specialist maintains close ties with Nvidia. In turn, the insatiable demand for Nvidia’s cutting-edge processors is also driving sales of the supporting computer hardware supplied by Supermicro (as the company is also known).
Supermicro’s sales jumped 103% year over year to $3.7 billion in its second quarter of fiscal 2024, which ended Dec. 31. Better yet, the company’s net income jumped 68% to $296 million, even as it spent aggressively to increase production.
This strong performance, combined with encouraging sales trends, led management to increase its full-year revenue forecast to $14.3 billion from previous estimate of $10 billion to $11 billion. That would be more than double the $7.1 billion in sales the company made in fiscal 2023.
Additionally, Supermicro’s stock price has retreated from recent highs following its stock offering in March. But that stock sale raised about $1.7 billion that the company can now use to strengthen its manufacturing network and fund its other expansion initiatives.
These growth investments should pay off for Supermicro shareholders. The AI server market will exceed $177 billion by 2032, up from $38 billion in 2023, according to Global Market Insights. Investors who buy Supermicro stock at a discount today should be well rewarded as the company races to satisfy the scorching demand for its AI tools.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.
2 Obvious Artificial Intelligence (AI) Stocks to Buy Right Now was originally published by The Motley Fool
