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NVIDIA Corporation (NVDA - Free Report) and Super Micro Computer, Inc. (SMCI - Free Report) are both currently riding the artificial intelligence (AI) infrastructure boom. But with Supermicro facing margin pressure and NVIDIA offering far stronger profitability metrics, could NVDA now be the better investment? Let’s take a closer look –
Reasons to Be Bullish on NVIDIA Stock
The rise in data center capital spending has led to stiff competition between NVIDIA and its peers, including Advanced Micro Devices, Inc. (AMD - Free Report) and Intel Corporation (INTC - Free Report). However, despite the challenges, NVIDIA managed to post solid quarterly results consistently, banking on the rapid progress in AI. Quarter after quarter, NVIDIA’s performances were commendable due to the increasing demand for its chips, including the latest Blackwell architecture and cloud-based graphics processing units (GPUs).
NVIDIA’s revenues jumped 62% year over year and 22% sequentially to $57 billion in the fiscal third quarter of 2026, according to investor.nvidia.com. In fact, the company expects revenues for the fiscal fourth quarter of 2026 to come in at nearly $65 billion, with a plus or minus 2%. And why not? Thawing trade tensions between the United States and China are expected to support NVIDIA’s sales. The U.S. government has approved the shipment of NVIDIA’s H200 AI chips to China, while Chinese authorities have permitted their sale to selected customers.
Reasons to Be Bullish on SMCI Stock
AI is significantly increasing demand for hardware, which is likely benefiting Supermicro. The company’s Data Center Building Block Solutions (DCBBS) has seen growing adoption among AI clients, offering a comprehensive package that includes integrated servers, networking, storage, cooling, software and related services. This momentum has translated into robust revenue growth, with its fiscal second-quarter 2026 sales climbing 123% year over year to $12.7 billion, easily exceeding analysts’ expectations of $10.4 billion, according to ir.supermicro.com.
CEO of Supermicro, Charles Liang, added that Supermicro is scaling its AI server and storage capabilities and that its DCBBS helps customers deploy AI infrastructure faster and cost-efficiently, positioning the company to gain from the next wave of AI demand. Management remains bullish about Supermicro’s sales outlook, expecting fiscal third-quarter 2026 revenues to reach $12.3 billion, and full-year net sales to hit $40 billion or more.
NVIDIA or SMCI? Wall Street Is Betting Big on One AI Stock
Despite Supermicro’s rapid rise in revenue growth, ongoing pressure on its gross margins for some time has remained a concern. So, Supermicro earns less profit per dollar of sales. This is largely because, acting as an intermediary between NVIDIA and cost-conscious customers, its products have offered limited differentiation in a highly challenging, commoditized market.
Nonetheless, Supermicro’s gross margins dropped to 6.3% in fiscal second-quarter 2026 from 11.8% in the same quarter last year and 9.3% in the fiscal first quarter of 2026. Such low margins indicate that the company may face difficulties in generating profits once operating expenses are considered. In contrast, NVIDIA continues to demonstrate strong profitability, with its gross margin increasing to 73.4% in fiscal third-quarter 2026 from 72.4% in the fiscal second quarter of 2026, alongside steady revenue growth.
NVIDIA, anyhow, consistently delivered stronger profits than Supermicro, reflected in its return on equity (ROE) of 99.2% compared with SMCI’s 17.8%.
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Supermicro, meanwhile, has a debt-to-equity ratio of 66.9%, higher than NVIDIA’s 6.3%, suggesting greater financial risk and increased exposure to economic headwinds.
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Therefore, NVIDIA clearly stands out as the better stock to buy at this time, thanks to robust demand for its advanced chips and improving trade relations. NVIDIA has a Zacks Rank #2 (Buy), while Supermicro has a Zacks Rank #3 (Hold).
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