Soaring Artificial Intelligence (AI) Shares Outperform Nvidia, Buck the Trend

Soaring Artificial Intelligence (AI) Shares Outpace Nvidia, Marking a Striking Development

Ambarella's Edge AI Boom: A Look at the Little-known AI Stock

In the dynamic world of technology, one name that has been making waves is Ambarella. This little-known AI stock has been growing at an impressive pace, with edge AI processors accounting for 80% of its overall revenue this year.

The company's edge AI revenues have set new records for five consecutive quarters, a testament to its growing success. Ambarella designs computer vision processors for a variety of devices, including drones, vehicles, security cameras, and edge devices.

The global market for edge AI processors is projected to grow annually by 18% over the next five years, and Ambarella believes it can grow at a faster pace than its addressable market and win a larger market share. Its serviceable addressable market in edge AI chips could increase at an annual rate of 18% over the next five years to $12.9 billion.

Ambarella's impressive growth potential has not gone unnoticed. Analysts have upgraded their revenue expectations for the company, and its stock increased by nearly 17% after its latest quarterly results were released. In its fiscal 2026 second quarter, Ambarella's revenue jumped 50% year over year to $95.5 million.

The Ambarella stock trades at a price-to-sales ratio of under 10, which is lower than the U.S. technology sector's average of 8.5, making it an attractive investment opportunity. The company forecasts that its revenue will rise by 33% in fiscal 2026 to $379 million, up from an earlier forecast of 22% growth.

One of the key drivers of Ambarella's growth is the faster processing capabilities of edge AI processors. These capabilities are driving their adoption in autonomous vehicles and industrial applications. The faster processing capabilities of edge AI processors are also aiding in AI training and inference applications, as demonstrated by companies like Nvidia.

Nvidia's graphics processing units have played a vital role in powering AI technology. In fact, companies and governments have been buying Nvidia's most powerful chip systems for AI training and inference applications for the past three years. Nvidia's revenue in the second quarter of its fiscal 2026 was up by 56% to just under $47 billion.

However, the market's concerns about Nvidia's business in China are weighing on the stock. Management expects another 54% increase in Nvidia's revenue in the current quarter to $54 billion. Despite these concerns, the sizable opportunity in the edge AI market could help Ambarella exceed Wall Street's revenue expectations.

In conclusion, Ambarella's edge AI processors are driving its growth, and the company's stock is an attractive investment opportunity. With its impressive growth potential and lower price-to-sales ratio, Ambarella is worth considering for investors looking to capitalise on the booming edge AI market.