We recently published a list of 12 Most Profitable Growth Stocks To Invest In. In this article, we are going to take a look at where Super Micro Computer (NASDAQ:SMCI) stands against other most profitable growth stocks to invest in.
After the September inflation report, the market did feel a slight bit of panic but it seems to be fading away. After the report, the market expectations for a rate cut shifted, with 79.9% of participants predicting a cut to 450-475 basis points, while 20.1% expect the rates to remain unchanged. It was a change from 32.1% expecting a 50 bps rate cut and 67.9% anticipating a 25 bps cut at the beginning of the month as mentioned in our 8 Most Profitable Blue Chip Stocks to Invest in article.
However, on October 11, the CME FedWatch tool showed that 89.5% of the market now expects a 25 bps rate cut and the rest expect it to remain the same.
Market Corrections Ahead but No Bear Market in Sight
Christian Mueller-Glissmann from Goldman Sachs joined CNBC’s ‘Squawk Box’ to discuss the latest market trends. He believes that the stock market pullback in August could be a warning of more potential corrections, but he does not see a severe bear market ahead. His overall outlook is positive due to a healthy macroeconomic environment, where growth remains stable, inflation is under control, and central banks are starting to reduce rates. These factors create a favorable setting for equities and other risk assets.
He pointed out that while bullish market positioning contributed to August’s setback, the combination of declining inflation and rate cuts allows central banks to cushion against financial shocks, minimizing the risk of a deep downturn.
Mueller-Glissmann highlighted two key reasons for not expecting a major market decline: inflation has significantly dropped, giving central banks more flexibility, and price momentum over the past 6-12 months suggests a strong macroeconomic backdrop. With the labor market improving, he sees no signs of an economic downturn.
His strategy focuses on quality growth stocks that are temporarily undervalued and cyclical value stocks that could recover as the market stabilizes. Regarding inflation, he noted a shift from inflation relief to growth as the main market driver, raising concerns about inflation resurfacing if growth strengthens. However, he remains confident that inflation will stay anchored, and disinflation will continue into the year’s end.
Our Methodology
For this article, we used stock screeners to identify nearly 25 growth stocks above the market cap of $10 billion with a 5-year revenue compound annual growth rate (CAGR) of 30% or above. Next, we narrowed our list to 12 stocks with the highest TTM net income. We also mentioned the hedge fund sentiment around each stock, which was taken from Insider Monkey’s Q2 database of 912 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of technicians in a server room, testing and managing the newest server solutions.
Super Micro Computer, Inc. (NASDAQ:SMCI)
5-Year Revenue CAGR: 33.68%
TTM Net Income: $1.208 billion
Number of Hedge Fund Holders: 47
Super Micro Computer, Inc. (NASDAQ:SMCI) provides application-optimized IT solutions The company delivers innovative infrastructure for Enterprise, Cloud, AI, and 5G Telco/Edge markets, offering a wide range of products including servers, AI systems, storage, IoT devices, switches, and software. It is one of the most profitable growth stocks.
It designs and manufactures its products in-house in the US, Taiwan, and the Netherlands, focusing on scalability, efficiency, and environmental sustainability. Its Server Building Block Solutions allow customers to tailor systems to specific workloads using flexible and reusable components across various configurations.
The company is constantly innovating and moving ahead in the tech and AI space and adding products to its pipeline for future revenue growth. On October 3, Bloomberg reported that Super Micro Computer (NASDAQ:SMCI) announced a partnership with Fujitsu to develop energy-efficient servers for generative AI and high-performance computing, focusing on liquid-cooled systems for green data centers. The collaboration aims to create a platform featuring Fujitsu’s FUJITSU-MONAKA processor, set for release in 2027.
On October 7, Super Micro Computer (NASDAQ:SMCI) revealed a comprehensive liquid cooling solution for data centers, which improves energy efficiency and reduces costs for AI and HPC workloads. The solution includes coolant distribution units, cold plates, cooling towers, and lifecycle management software, all designed to handle high-wattage servers with the latest NVIDIA GPUs and CPUs.
Supermicro’s liquid cooling reduces power consumption by up to 40% and saves up to 80% in space and eliminates the need for traditional cooling systems. The company has deployed over 100,000 NVIDIA GPUs with this technology, optimizing AI factory performance and increasing computing power in a smaller footprint.
Finally, on October 10, Super Micro Computer (NASDAQ:SMCI) introduced a new lineup of servers and GPU-accelerated systems featuring AMD EPYC 9005 Series CPUs and AMD Instinct MI325X GPUs, designed for AI-ready data centers. The H14 family includes several configurations, such as Hyper, CloudDC, GrandTwin, and FlexTwin systems, which support AI inference and enterprise workloads.
These systems offer improved performance, with up to 192 CPU cores per unit, and advanced cooling options, including both air and liquid cooling. The H14 family is optimized for power efficiency, reducing data center footprint by over two-thirds, while enabling faster AI processing and improved operational efficiency.
Overall, SMCI ranks 7th on our list of most profitable growth stocks to invest in. While we acknowledge the potential of SMCI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SMCI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
