Two AI-focused stocks are surpassing Nvidia's performance and exhibit potential for further upward momentum.
Nvidia's stock may have been a major winner in the AI revolution, but its past three months have been challenging, with shares down 1%. This is surprising given the company's outstanding results and better-than-expected guidance during this period. However, concerns about growth sustainability, valuation, and margin pressure due to Blackwell processor ramp-up are weighing on Nvidia's stock price. In contrast, Ambarella and Lumentum Holdings have seen impressive gains due to AI-focused growth drivers.
Ambarella, known for computer vision chips, is finding new application in AI. Their CV5 processor, based on a 5-nm process node, can process AI workloads in automotive, consumer, and robotics cameras. This processor's demand is increasing, contributing to record AI revenue and a higher ASP. Ambarella expects this demand to continue in fiscal 2026 and for the demand for CV7 to pick up in the new fiscal year. Revenue in Q3 fiscal 2025 increased by 63%, and the company is on track to finish fiscal 2025 with total revenue of $279 million, a 23% improvement over the previous year.
Lumentum Holdings is benefiting from the rising demand for high-speed data transmission in AI servers. The market for generative AI networking equipment could increase at a 34% annual rate between 2023 and 2028, generating $34 billion in annual revenue. Lumentum's Q1 fiscal 2025 revenue increased 6%, offsetting the weakness in the industrial business due to cloud and networking demand. The company is expanding its production capacity to meet the growing demand and has added new hyperscale customers. Lumentum's earnings are projected to jump by 56% in fiscal 2025, followed by healthy growth in subsequent years.
AI is driving growth for both companies. Ambarella's automotive revenue pipeline is $2.2 billion through fiscal year 2031, and their cloud and networking revenue jumped 23% year over year in Q1 fiscal 2025. Lumentum's datacom business is also seeing strong growth due to surging AI infrastructure investments and a significant increase in cloud and networking revenue.
In summary, while Nvidia's stock is facing challenges, Ambarella and Lumentum Holdings are thriving due to AI-driven growth. Ambarella's CV5 processor demand is driving record AI revenue, and Lumentum is gaining from high-speed data transmission demands in AI servers. Both companies are expected to continue growing as the AI market expands.
Investors who are keen on finance and seeking potential investment opportunities might consider looking into Ambarella and Lumentum Holdings, given their impressive growth due to AI-driven markets. Ambarella, for instance, is generating record AI revenue from the increasing demand for their CV5 processor, and expects this trend to continue in the future. On the other hand, Lumentum Holdings is benefiting from the rising demand for high-speed data transmission in AI servers, with projections of significant growth in the years to come.
