Super Micro Computer (SMCI -3.25%) is arguably one of the more surprising successes of the current boom in artificial intelligence (AI) stocks. The manufacturer of servers existed in relative obscurity for decades despite expanding its operations to more than 100 countries.
However, a partnership with Nvidia has stoked demand for its servers as customers seek the hardware for running AI applications. Consequently, the stock has risen more than 2,000% in the last three years.
With those gains, investors who have held the stock for three years or more have a likely path to millionaire status even if they started with relatively small investments. What is less clear is whether small investors can expect to become millionaires by starting now.
The state of Super Micro
Super Micro has existed since 1993. The company committed to its role as a rack-scale, total IT solutions provider, building energy-efficient and environmentally friendly servers for its customers.
Since its founding, the company has become an innovator in the server industry. It also expanded steadily, establishing operations in Asia and Europe in the 1990s. That expansion enabled the launch of its initial public offering (IPO) in 2007. Nonetheless, between its 2007 IPO and the end of 2021, the stock had appreciated less than 400%.
However, its servers became increasingly popular in this decade, and the sudden interest in generative AI sent its stock into the stratosphere.
The bull market in these investments may not end anytime soon. Allied Market Research projects a compound annual growth rate (CAGR) of 38% for the AI chip industry through 2028. Thus, even if growth slows after 2028, it is likely that Super Micro will be at the center of a much larger industry years from now.
Super Micro's financials and metrics
One can see that trend in the increase in Super Micro stock. A $10,000 investment three years ago would be worth just under $240,000 today. This means it has doubled in value more than four times over that time. At that value, shares would only have to double just over two more times to reach $1 million. Hence, those holding long-term positions in Super Micro can become millionaires even if they started small.
Still, those who buy now will probably have to take larger positions. Here's why.
Its market cap, which was only about $2 billion three years ago, has now reached $52 billion. If you invested $10,000 at today's price, the market cap will have to rise to $5.2 trillion to make that a $1 million investment.
Needless to say, such a market-cap level would take considerable industry growth. Its partner Nvidia, which leads the industry segment that has taken Super Micro higher, has a market cap of around $2.25 trillion, about 43 times Super Micro's size.
While both companies should continue to grow long term, it would take an almost unimaginable amount of growth to take Super Micro's market cap to $5.2 trillion and beyond, a factor calling for some perspective when it comes to Super Micro's "millionaire-maker" status.
Investing in Super Micro
Today's small investors are unlikely to become millionaires from Super Micro stock. Indeed, the company has experienced massive growth amid a partnership with Nvidia.
Nonetheless, the more recent increases have taken Super Micro's market cap into large-cap status. Also, with that gain, it is less than 3% of Nvidia's current size. Since Super Micro would have to grow to more than 2.4 times Nvidia's size to make small investors millionaires, investors should not expect such results.
Still, this does not necessarily mean investors should write off Super Micro stock. Considering the popularity of AI and anticipated growth for the industry, investors can still become significantly richer in Super Micro regardless of where they start.
