The past several weeks have seen a significant surge in the stocks of various artificial intelligence (AI) companies. These include Palantir Technologies, Super Micro Computer, Arm Holdings, and SoundHound AI, with their shares soaring by as much as 121% in the month of February alone. The driving force behind this upward trend is the growing adoption of AI across multiple industries.
It is important to note that there was not a single event that propelled these stocks higher, but rather a collective recognition of the increasing presence of AI in the technology sector. Let’s take a closer look at each company and what drove the growth in their stock prices.
Starting with Super Micro Computer, the company reported its fiscal 2024 second-quarter results, revealing a staggering 103% increase in revenue year over year, driven by the surging demand for AI servers. Palantir Technologies also reported strong numbers, with a 20% increase in revenue for the fourth quarter, fueled by a 70% jump in U.S. commercial revenue. The company expects at least 40% growth from its U.S. commercial business in the coming year, thanks to robust demand for its AI Platform.
Arm Holdings, on the other hand, delivered record-breaking results in its fiscal 2024 third quarter, with revenue climbing 14% year over year. The company’s forecast for the fourth quarter also exceeded expectations, with a projected growth rate of 34% to 42%. These beat and raise quarters, where companies surpass investor expectations and provide bullish guidance, have contributed to the significant growth in their stock prices.
Another notable player in the AI space is Nvidia, which has seen its stock prices skyrocket in recent times. Nvidia’s fiscal 2024 third-quarter revenue reached a record high, jumping 206% to $18.1 billion. When Nvidia makes any significant move in the AI industry, investors take notice. In a recent regulatory filing, the company revealed that it had acquired stakes in several AI-related companies, including SoundHound AI and Arm Holdings.
Nvidia’s purchases have been viewed as a vote of confidence in these companies, prompting many investors to follow suit and invest in their stocks. This, combined with the impressive financial results, has contributed to the surge in AI-related stock prices.
One common concern among potential investors is the valuation of these AI stocks. However, when considering the exceptional growth rates of these companies, a different perspective emerges. Using the price-to-earnings-to-growth (PEG) ratio, which takes into account the company’s profit growth rate, it is evident that Arm Holdings, Super Micro Computer, and Palantir Technologies are all undervalued, with PEG ratios well below 1.
In conclusion, the rapid adoption of AI and the strong financial performance of companies in the AI space have fueled the significant growth in their stock prices. The investments made by Nvidia in AI-related companies have further boosted confidence in the sector. Despite concerns about valuation, the impressive growth rates and undervalued status of these companies make them attractive opportunities for investors interested in the AI market.
