This week, growth stocks in artificial intelligence (AI) and data centers took a hit. However, there are two AI-focused stocks worth considering that have become more affordable.
Super Micro Computer (NASDAQ: SMCI) is a major player in the AI industry, experiencing a 1,000% increase in its stock price over the past 18 months. The company designs and manufactures high-performance computer servers and storage systems used in data centers, cloud computing, and AI applications. Super Micro has also benefited from a long-standing partnership with Nvidia, a leading AI company. Despite a recent pullback in its share price, Super Micro presents a buying opportunity with a 42.7% discount from its average share price target. With a forward P/E ratio of 32.4 times and a PEG ratio of 0.69, the stock appears undervalued, although there is a risk of not meeting future earnings forecasts due to industry competition.
Sterling Infrastructure (NASDAQ: STRL) is another AI/data center stock that has seen a 125.5% increase in its stock price over the past 12 months. The company, known for its construction projects, has a significant backlog, with data centers accounting for 40% of its projects. Despite a recent pullback in its stock price, Sterling Infrastructure is trading around 15% below its share price target with a P/E ratio of around 21 times. While concerns about future spending on AI chips and data centers exist, the company’s solid backlog provides visibility on future earnings and sustains its growth momentum.
Overall, both Super Micro and Sterling Infrastructure present investment opportunities in the AI-focused market, despite potential risks associated with meeting future earnings forecasts.