Which company is the focal point this week? It’s Nvidia (NASDAQ: NVDA), hands down. The chipmaker will announce its second-quarter earnings results following the market close on Wednesday.
I fully expect Nvidia’s numbers to please investors again, enabling it to increase its already impressive gains this 12 months. But there’s one other stock-split stock that would also soar if Nvidia delivers a blowout Q2 update.
Joined on the hip
Super Micro Computer (NASDAQ: SMCI), also called Supermicro, is arguably joined on the hip with Nvidia. The corporate provides server and storage solutions which might be especially popular in data centers.
The identical artificial intelligence (AI) tailwind fueling Nvidia’s growth also helps Supermicro. Charles Liang, Supermicro’s president and CEO, said earlier this month that his company “continues to experience record demand of latest AI infrastructures.” In consequence, Supermicro’s revenue within the fourth quarter of its fiscal 2024 soared 110% 12 months over 12 months.
If Nvidia handily beats expectations with its Q2 results on Wednesday (and, more importantly, if the corporate’s guidance is powerful), it is going to bode well for Supermicro’s fortunes over the near term. I search for Nvidia to also provide some clarity on the timing of when chips based on its recent Blackwell architecture will begin shipping. This must also help Supermicro, which has liquid-cooled AI superclusters able to support Blackwell.
Sure, Liang maintains that a delay for Blackwell won’t impact Supermicro much since it does business with other chipmakers. Make no mistake about it, though: Excellent news from Nvidia will translate to excellent news for Supermicro.
Will Supermicro’s stock split provide one other catalyst?
I do not think there’s much doubt that a blow-out Nvidia Q2 update would offer a catalyst for Supermicro. But what in regards to the company’s 10-for-1 stock split scheduled for Oct. 1? It’s iffy, for my part.
For one thing, Supermicro’s stock split won’t change anything in any respect in regards to the company’s underlying business or its growth prospects. Alternatively, spectacular guidance from Nvidia would likely mean stronger growth ahead for Supermicro.
Any investor who really desired to buy shares of Supermicro could accomplish that even with its share price trading within the ballpark of $600. Many online brokerages support buying fractional shares.
Nonetheless, this will likely be Supermicro’s first stock split. I’ll admit that it’s possible some investors who’ve remained on the sidelines could view the split as an amazing opportunity to purchase the stock. I believe the allure to take a position in Supermicro could possibly be even greater if the stock indeed soars as I expect it is going to following Nvidia’s quarterly update this week.
Is Supermicro a greater stock to purchase than Nvidia?
Now for an excellent more essential query: Is Supermicro a greater stock to purchase than Nvidia? Wall Street seems to think so.
The consensus 12-month price goal for Supermicro of analysts surveyed by LSEG in August reflects an upside potential of over 50%. By comparison, the common price goal for Nvidia is barely lower than its current price.
I agree that Supermicro is a greater pick than Nvidia. My primary reasoning is valuation. Supermicro’s shares trade at a much lower forward earnings multiple than Nvidia’s. But when Nvidia gives great news to investors on Wednesday, each of those stocks must be big winners.
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Keith Speights has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot has a disclosure policy.
This Stock-Split Stock Could Soar If Nvidia Delivers a Blowout Q2 Update was originally published by The Motley Idiot