AI Revolution: Two Hidden Gems Outshine Nvidia
The artificial intelligence (AI) boom has been a game-changer for the tech industry, and Nvidia has been one of the biggest beneficiaries. However, despite its impressive gains, the company’s stock has struggled in recent months. Meanwhile, two lesser-known chipmakers, Ambarella and Lumentum Holdings, have seen their stocks soar thanks to the positive impact of AI on their businesses.
Ambarella: Riding the AI Wave
Ambarella’s chips are used in automotive and Internet of Things (IoT) applications, and the company is now leveraging its expertise in computer vision to tap into the growing AI market. The AI computer vision processor market is expected to grow from $17.2 billion in 2023 to $45.7 billion in 2028, driven by demand from multiple verticals such as automotive, security, and consumer electronics.
Ambarella’s product portfolio is well-positioned to capitalize on this trend, with its CV5 processor capable of running AI-based algorithms in automotive cameras, consumer cameras, and robotics. The company has seen a significant increase in demand for this processor, driving record AI revenue and a higher average selling price (ASP).
Strong Financial Performance
Ambarella’s financial performance has been impressive, with revenue increasing 63% year over year to $82.7 million in the third quarter of fiscal 2025. The company swung to an adjusted profit of $0.11 per share from a loss of $0.28 per share in the year-ago period. Its fiscal Q4 guidance of $78 million would translate into a 51% increase in revenue from the year-ago quarter.
Lumentum Holdings: Benefiting from AI-Driven Growth
Lumentum Holdings is another chipmaker that’s benefiting from the growing demand for high-speed data transmission in AI servers. The company’s revenue increased 6% year over year to $337 million in the first quarter of fiscal 2025, driven by a 23% jump in cloud and networking revenue.
Lumentum’s cloud customer base is growing, with new hyperscale customers placing orders for its lasers used in fiber-optic cables to enable high-speed data transmission in AI servers. The company is expanding its manufacturing capacity to fulfill more orders, which should drive stronger growth in the coming quarters.
Robust Growth Ahead
Consensus estimates are projecting a 17% jump in Lumentum’s revenue for fiscal 2025 to $1.59 billion, followed by even stronger growth in the next fiscal year. The company’s earnings are expected to jump by 56% in the current fiscal year to $1.58 per share, followed by healthy growth in the next couple of years.
Investment Opportunity
While Nvidia’s stock has struggled in recent months, Ambarella and Lumentum Holdings have seen their stocks soar thanks to the positive impact of AI on their businesses. With their strong financial performance and robust growth ahead, these two chipmakers could be attractive investment opportunities for those looking to tap into the AI boom.
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