Super Micro Computer (NASDAQ: SMCI) and Palantir Technologies (NYSE: PLTR) both have delivered significant gains to investors this year. Supermicro soared 188% in the first half, even surpassing the performance of market darling Nvidia. It's since pulled back but still is heading for a 60% increase this year and a 2,100% climb over the past five years. Palantir is on its way to an increase of almost 150% this year and is trading at a record high.
Both of these technology stocks have shown financial strength in recent times thanks to their growth in the high-potential area of artificial intelligence (AI). Supermicro this year reported quarterly revenue that surpassed an entire year of revenue as recently as 2021. And Palantir's net income in the latest quarter marked its biggest quarterly profit ever.
These companies aren't new to the scene -- Supermicro is more than 30 years old, while Palantir has been around for about 20 years -- and throughout that time they've built a track record of growth. But things have truly taken off for both of them with the AI boom. Now, should you buy Supermicro or Palantir? Let's find out more about each one and then see what Wall Street has to say.
Supermicro is a behind-the-scenes star in the AI world. The company makes equipment essential for the successful operations of data centers -- elements such as workstations and servers. Supermicro's strategy of using many common parts as building blocks for its products helps it speedily bring tailor-made equipment to its customers. The tech powerhouse also works closely with top chip designers so that it can immediately integrate their innovations into its products -- and this ensures quick delivery too.
This has helped Supermicro register a five times faster growth rate than its industry over the past 12 months. And Supermicro has two key growth drivers ahead: the development of direct liquid cooling (DLC) for data centers and the opening of a new production facility in Malaysia.
DLC solves one of the biggest problems of AI data centers -- the buildup of heat. Supermicro predicts 25% to 30% of new data centers in the coming 12 months will use DLC, and the company expects to dominate that market. And the new Malaysia facility should boost Supermicro's margins as it focuses on high volume and lower cost.
So, what's weighed on the stock recently? A short report in August alleged troubles at the company, and a few weeks later, The Wall Street Journal reported the Justice Department is investigating Supermicro. The company called the short report comments "false or inaccurate" and didn't comment on the WSJ article. But these elements may continue to limit gains until completely resolved.