When one thinks of artificial intelligence hardware stocks, the first that usually come to mind are advanced semiconductor giants such as Nvidia, Advanced Micro Devices, or Intel.

However, one tech company that incorporates all three of those companies' chips into its advanced server platforms is absolutely trouncing their stocks this year. Though the Nasdaq Composite is still down by 26.1% year to date and the iShares Semiconductor ETF is off by 29.1%, Super Micro Computer (SMCI -2.96%) has rocketed to a 97.3% gain.

Here's how Super Micro did it, and why the good times may continue.

QQQ Year to Date Total Returns (Daily) Chart

QQQ Year to Date Total Returns (Daily) data by YCharts.

A multiyear transformation coming to fruition

It's hard for any technology stock to rise during a year like this, so one would have to suspect that something unusual must be going on at Super Micro.

That's exactly the case. After the discovery of accounting issues in 2017 and 2018 caused a crisis of confidence, Super Micro stock was sold off to a cheap valuation. However, the company's standing in the industry never diminished, and its energy-efficient server designs remained in favor with top tech firms. Eventually, its accounting troubles -- which involved the timing of revenue recognition, not fabricated sales or profits -- were resolved.

During that downturn, Super Micro developed a growth plan that involved a shift from supplying server components to selling its own full systems, as well as "total IT" solutions. These comprehensive solutions consist of complete rack systems containing servers, storage, software, security, and services, each optimized for different applications such as high-performance AI, 5G telecom, edge computing, or accelerated storage.

Super Micro had also previously manufactured its server solutions only in Silicon Valley. But in the last couple of years, it built a new plant in Taiwan to supply Asian customers more cost-efficiently. And because the Taiwan campus has lower costs, the servers coming out of it are able to appeal to cost-sensitive cloud customers -- a market Super Micro hadn't penetrated before.

In addition to lower-cost manufacturing, Super Micro's designs emphasize two incredibly important features: a plug-and-play "building block" architecture and extremely energy-efficient designs. The building-block feature allows customers to swap out parts or components within server and storage systems to upgrade them rather than having to replace entire systems, saving them tons of money over the long term.

Similarly, in the wake of energy prices' recent upward surge, Super Micro's energy-efficient designs are more appealing to data center operators. Indeed, there has been no bigger issue this year for data center operators than energy costs, and that's helping Super Micro take lots of market share.

After crushing guidance in 2022, another strong projection for 2023

As Super Micro's strategy has come to fruition this year, its revenue and profit growth have accelerated. Last quarter, revenue grew 79% year over year while its adjusted (non-GAAP) gross margins expanded by 5.4 percentage points to 18.8%, leading to adjusted earnings-per-share (EPS) growth of 255% to $3.42.

Yet despite Super Micro's eye-popping year-to-date gains, the stock actually still looks cheap, trading at a price-to-earnings ratio of just 10.3.

While that type of valuation often means investors expect a reversion to the mean, management has guided for continued growth in its fiscal 2023, which ends in June 2023. Management now expects adjusted EPS of between $9 and $11.30 for the fiscal year, up from $5.65 in fiscal 2022. Yet the share price is now in the neighborhood of just $83.

So, Super Micro trades at much less than 10 times this fiscal year's guidance. But what's especially encouraging is that management has a track record of repeatedly under-promising and over-delivering. For instance, in the summer of 2021, management guided for just $3 in adjusted EPS in 2022, but wound up delivering EPS of $5.65, despite all the well-documented macroeconomic headwinds.

In fact, as recently as last quarter, management forecast at least $7.50 in EPS for fiscal 2023 before raising its guidance range to $9 to $11.30 with the early November release of its latest quarterly results.

SMCI has bigger ambitions

CEO Charles Liang has been saying for a couple of years that he envisions Super Micro becoming a $10 billion revenue business, potentially as soon as 2024. The company certainly looks to be on its way to achieving that -- its trailing-12-month revenue doubled to $6 billion over just a couple of years. Furthermore, in its recent earnings releases, Liang has stated an even more ambitious goal: to reach $20 billion in revenue over the medium to long term. With that in mind, and given its market cap of just $4.4 billion, there could still be material upside in this market-beating stock, even after this year's robust gains.

Liang and his team have backed up their projections over the last couple of years with results, so I wouldn't doubt the ability of this company to reach those levels. Liang is also well-incentivized to achieve those goals. As the company's founder, he owns a hefty 13.9% of Super Micro's stock. Moreover, in 2021, his compensation package was changed to just a $1 salary, with 1 million stock options to be awarded in tranches based on revenue targets up to $8 billion and stock price targets ranging from $45 to $120. With the stock trading at $83, there are still more targets for Liang to hit.

It's not too late to join the SMCI party, as long as servers remain in demand and energy costs remain a concern. Those look like pretty safe bets in 2023 and beyond.