Meet the New Stock-Split Stock that outperformed Nvidia in the first half and Wall Street thinks it could nearly double

Nvidia has been a tough act to follow in recent years. The artificial intelligence (AI) chip giant posted triple-digit increases in earnings quarter after quarter, and its stock price followed suit. Shares of Nvidia are up more than 2,400% over the past five years, and given the company’s focus on innovation, this stellar performance can only continue.

While Nvidia has gotten most of the attention from investors lately, another tech player actually surpassed this AI powerhouse in the first half of the year. And that company recently followed in Nvidia’s footsteps by announcing a stock split, a move to bring down a high stock price — and make the stock more accessible to a wider range of investors.

Now, Wall Street is predicting that this player’s earnings may be far from over. Let’s meet the new stock split that analysts believe could nearly double in the next 12 months…

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A triple digit gain in the first half of the year

And this stock is Super Micro Computer (SMCI 0.07%)a company that saw its share price rise 188% in the first half of the year, outpacing Nvidia’s 149% rise. Although individual forecasts vary, the average estimate on Wall Street calls for the stock to rise 90% from current levels.

It’s important to note that this once high-flying stock has been wading through rough waters in recent weeks. A brief report released by Hindenburg Research alleging problems at the company weighed on the stock. In an unrelated move, Supermicro delayed filing its annual 10-K report, and that represented a headwind.

I see these as short-term pressures, but they don’t change Supermicro’s long-term story. And given the stock’s 20% drop since the brief report, it looks very cheap right now — trading for just 13 times forward earnings estimates, down from more than 45 times earlier in the day of the year.

In recent days, some analysts have highlighted Supermicro’s potential. For example, Needham rated Supermicro as a new stock hedge — and Needham expects a 37% gain in the coming months.

Why should we be so optimistic about Supermicro? First, the company has proven its ability to dominate the field of full-scale rack solutions for data centers. Supermicro’s servers and other products share many common parts so the company can more quickly build a specific item to fit a customer’s needs. The equipment maker also works very closely with all the leading chipmakers — including Nvidia — so that it can immediately include their innovations in its products. This helped single-quarter revenue surpass annual revenue as early as 2021.

Supermicro’s big opportunity

Second, Supermicro now faces a major opportunity that could launch a whole new wave of sustainable growth for the company. One of the biggest problems facing today’s and tomorrow’s data centers is that AI workloads produce excessive heat. Supermicro’s Direct Liquid Cooling (DLC) technology, once a slow-growing business, now promises to deliver explosive growth.

The company predicts that in the next 12 months, 25% to 30% of data centers will be equipped with DLC, and Supermicro will dominate this market. At the same time, Supermicro is bracing for demand for DLC and its gear in general as it brings its Malaysian facility online — one that will focus on volume and speed.

Given predictions that an AI market will reach $1 trillion by the end of the decade, and the key role of data centers in all of that, Supermicro’s revenue could continue to grow for some time to come.

As for the stock split, Supermicro will trade at its new adjusted split price from October 1. This won’t change anything fundamental about the company or the stock — the valuation and market value remain the same. So it won’t act as a catalyst for the stock’s performance, but it’s a positive move as it will make it easier for more investors to buy the stock over time.

All of this is a lot of positives for Supermicro, setting the stage for major upside potential — and making it a fantastic stock to buy on the decline.