Smart investors know that buying stocks in “tip and shovel” companies during a gold rush is a proven wealth-building strategy. When it comes to the artificial intelligence (AI) boom, it is the computing infrastructure that enables the breakthrough technology. Think chips and computer servers rather than picks and screen pans.
If this lower-risk investment approach sounds appealing, read on to learn about two key AI infrastructure players that have particularly attractive growth prospects. Both stocks are interesting buys today.
1. Arm stocks
An incredible 30.6 billion chips were shipped in the 2023 fiscal year alone. Arm stocks‘ (NASDAQ:ARM) The reach extends across almost every technology-oriented market. From personal computers (PCs) and data centers to smartphones and autonomous vehicles, demand for Arm’s energy-efficient semiconductor technology is skyrocketing.
Many leading chip manufacturers develop their products using the Arm architecture. In September, Apple extended its partnership with Arm, allowing the tech titan to incorporate Arm’s intellectual property into its custom chips for its popular iPhones and Macs through at least 2040. In November Microsoft announced that its cloud computing services would provide access to new Arm-based chips. And in March Nvidia introduced its powerful Blackwell high-performance computing platform, which features ARM processors. Overall, Arm estimates that 70% of the world’s population uses products made with its technology.
Additionally, Arm is gaining market share in all of its key markets thanks to the combination of performance, efficiency and cost-effectiveness of its chip architecture.
This growing market share is leading to strong growth in Arm’s sales and profits. Revenue rose 14% to $824 million in the quarter ended Dec. 31, while adjusted net income rose 36% to $305 million.
Increased spending on AI solutions is driving Arm’s growth. “We see demand for Arm technology to enable AI everywhere, from the cloud to the edge devices in the palm of your hand,” CEO Rene Haas and CFO Jason Child said in a letter to shareholders.
Arm’s sales are likely to increase again. The company expects its revenue to increase by up to 42% in the fiscal fourth quarter.
“We believe AI is the greatest opportunity of our lifetime, and we are just getting started,” Haas said during an interview with Bloomberg in February.
2. Super microcomputer
It’s not just chip manufacturers who are benefiting from the AI gold rush. Demand for high-performance servers, data storage systems, and other AI-focused computing infrastructure is increasing rapidly. Super microcomputer (NASDAQ:SMCI) is helping its customers provide the innovative hardware solutions they need for their AI ambitions – and business is booming.
The server specialist has close connections to Nvidia. The insatiable demand for Nvidia’s cutting-edge processors also drives sales of the supporting computer hardware that Supermicro (as the company is also known) offers.
Supermicro’s revenue rose 103% year over year to $3.7 billion in the second quarter of fiscal 2024, which ended Dec. 31. Better yet, the company’s net income rose 68% to $296 million even as the company invested aggressively to increase production.
This strong performance, combined with encouraging ongoing sales trends, led management to raise its full-year revenue forecast to $14.3 billion to $14.7 billion from a previous estimate of $10 billion to $11 billion. That would be more than double the $7.1 billion in revenue the company generated in fiscal 2023.
Additionally, Supermicro’s stock price has declined from its recent highs following its stock offering in March. But that stock sale raised about $1.7 billion, which the company can now use to strengthen its manufacturing network and fund its other expansion initiatives.
These growth investments should bear fruit for Supermicro shareholders. According to Global Market Insights, the AI server market will exceed $177 billion by 2032, up from $38 billion in 2023. Investors who buy Supermicro shares at a discount today should be well rewarded as the company is working to meet the high demand for its AI tools.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Natural Artificial Intelligence (AI) Stocks to Buy Now was originally published by The Motley Fool