AI growth stock Nvidia has soared 180% in the past 12 months, and it’s up 2,500% in five years.
But the Raspberry Pi (LSE: RPI) share price has barely moved since its IPO in June. Still, we did see a 9% gain on interim results morning, 24 September.
First look
In its first results as a public company, the maker of single-board computers beat expectations.
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Revenue rose 61%, with a 55% jump in adjusted EBITDA. The same period last year was constrained by supply difficulties, but it still looks like a cracking result.
Demand for the Raspberry Pi5, launched last October, gave these figures a nice boost. In the first half of the year, it sold 1.1m units.
Oh, and Raspberry Pi confirmed its inclusion in the FTSE 250, after September’s quarterly review. The company has a market cap of £699m. Nvidia is worth around 2,800 times as much, though, so there could still be room for growth.
Where’s the AI?
The company also launched its new AI-specific product in the period. It’s the Raspberry Pi AI Kit, developed in collaboration with Hailo AI, an Israeli company that designs AI chips.
The Raspberry Pi Connect cloud connectivity product is also new, and it’s attracted 50,000 users since launch in May.
This range of products is what makes me see Raspberry Pi as a strong candidate to profit from the coming AI boom.
The thing is, it’s not all about the processors themselves. And it’s not just about clever software, like these fast-developing large language models (LLMs) like ChatGPT.
Sum of the parts
No, it’s about bringing it all together. Does Tesla want to sell AI-driven cars? Of course it does, and so do others. But it needs more than just a handful of Nvidia chips plus software that can understand where you want to go.
It needs the clever control circuitry, the connections to cloud-based navigation data, and all that stuff.
There’s already plenty of competition out there, and that’s likely to increase. But right now, I see a great chance for Raspberry Pi to get a lot more than just a foot in the door.
But, am I too optimistic, and might I lose if I buy now?
Valuation
Valuation seems like the key risk. Forecasts show a price-to-earnings (P/E) ratio of 52 for the full year.
To put that into perspective, it’s higher than Nvidia’s forward P/E of only 42. And even looking two years further ahead, we still see Raspberry Pi valued on a P/E of 28, with Nvidia still lower at 26.
Will UK stock market investors be prepared to hold on to P/E valuations as high as that for long? I mean, this isn’t the Nasdaq.
The other risk I see is that the barriers to entry in the single-board computer market are just not as formidable as those that chip designers enjoy.
I’d buy
But with what I see as strong potential, I think this might very well be my next stock market buy.
