Top-performing, mega-cap tech stock Super Micro Computer (NASDAQ:SMCI) has seen impressive investor demand in recent months. As the AI surge has continued, demand for the company’s servers and work centers which power AI companies has continued to see strong growth.

With more than $3 billion in revenue highlighting this past quarter’s results, there’s plenty of anticipation that growth could continue to propel this number much higher over time. Indeed, with several analysts and market experts believing that the AI market could become a $1 trillion opportunity by the end of the decade, the question is which companies will capture most of the value in this space.

Super Micro certainly appears well-positioned to do so. But let’s dive into whether it’s an AI stock worth buying at its current pricey valuations of 40x earnings and 3.5x sales.

Running After Nvidia

Super Micro’s customizable products and partnerships with top chip designers, like Nvidia (NASDAQ:NVDA), continue to drive innovation. The company’s new Malaysian facility aims to cut costs and increase production, boosting margins and net income. Indeed, as more such facilities come online, there’s a lot to like about Super Micro’s potential to grow, given its key direct liquid cooling technology.

The company’s expertise in cooling systems, especially its direct liquid cooling technology, is expected to drive growth as data centers increasingly adopt this solution. Moreover, its Nvidia partnership excelled in early 2024 with strong performance and high valuation added more optimism. SMCI reported $3.85 billion in quarterly sales and $402 million in net income. The stock was also recently added to the Nasdaq 100, improving investor appeal should continue to grow over time.

Strong in AI

Interest in generative AI became prominent after ChatGPT was launched in 2022. However, it’s becoming increasingly clear to investors that the real winners are likely to be infrastructure companies like Super Micro. The company’s niche has driven impressive success, evidenced by a 200% jump in Q3 net sales to $3.85 billion. Further, the company benefits from Nvidia’s GPU demand and focus on energy-efficient designs, aiding market share growth.

Investors shouldn’t rely solely on Wall Street projections to choose between Super Micro and its rivals. Conducting personal research is crucial. Tech companies have realistic bullish growth prospects fueled by AI demand. Super Micro’s servers and Nvidia’s GPUs, for example, are expected to see continued growth. Their rapid innovation provides a significant competitive edge. Supermicro’s revenue growth is roughly five times the industry average due to its quick product introductions.

SMCI May Be Worth Buying Before Earnings

Super Micro dropped over 10% in a recent tech selloff but certainly has the potential to rebound. This rebound potential is driven in part by the company’s upcoming earnings report on August 6. ServiceNow (NASDAQ:NOW) and other major tech names have seen big recoveries after surpassing earnings estimates, and SMCI might follow suit. SMCI’s market cap is about $40.6 billion, trading at around $693 per share.

SMCI stock fell 1.5% as investors anticipated a fiscal fourth quarter pre-announcement, indicating confidence in its performance. Pre-announcements, typically made weeks before earnings reports, update investors with the latest financial data and manage market expectations, stabilizing stock prices and maintaining investor confidence.

That said, Super Micro Computer stock may be worth considering on this recent dip. Super Micro’s core business model stands poised to benefit from a surge in growth tied to AI adoption from mega-cap tech companies. So long as these trends remain in place, and other major players report strong earnings, this is a company that could significantly outperform over the long term.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.