Key Points
-
Power management systems are an underrated part of AI infrastructure that have helped Monolithic Power Systems outperform Nvidia this year.
-
Astera Labs’ rack-scale AI infrastructure continues to grow with hyperscalers and provides high sequential growth rates for investors.
-
Cadence Design Systems is positioned well for the broad commercialization of AI agents.
- 10 stocks we like better than Monolithic Power Systems ›
Nvidia went on an incredible run to become the world’s most valuable publicly traded company, but its 11% year-to-date return looks pedestrian compared to some of the other AI stocks that have been capturing headlines in recent months.
The three growth stocks on this list all have exposure to the AI infrastructure build-out, and they’ve all outgained Nvidia so far this year. They also look well positioned to extend their rallies and outperform it in 2027.
1. Monolithic Power Systems
Monolithic Power Systems (NASDAQ: MPWR) produces power management systems that enable data centers to maintain continuous uptime without overloading AI chips. Power management systems work hand in hand with liquid-cooling solutions to keep chips and servers cool.
The stock has rallied by more than 40% year to date as AI data centers’ demand for the company’s products has grown. Monolithic Power Systems’ revenue increased by 26.1% year over year in the first quarter, and net income grew at a slightly faster rate.
While the company lists six business segments in its earnings results, two of them are doing most of the heavy lifting. Enterprise data is the main one. It accounted for about one-third of total sales, and it nearly doubled year over year. This part of the business addresses power management and integrated solutions for AI chips and servers.
The communications segment is the other big one. This part of the business focuses on telecom infrastructure, satellite systems, and networking equipment. Its top line was up by 55.5% year over year, and up 33.1% sequentially, thanks to AI tailwinds. It makes up 14% of total sales.
As these two hypergrowth parts of the business gain market share, Monolithic Power Systems should experience accelerating revenue growth. That should position the stock to outperform Nvidia again in 2027.
2. Astera Labs
Astera Labs (NASDAQ: ALAB) creates rack-scale connectivity hardware and software for AI servers. Many hyperscalers are turning to the company for connectivity solutions that enable faster data transmission between AI chips and server clusters.
Its revenue growth rates should prompt investors to give it a closer look. Sales almost doubled year over year in its first quarter, and its 14% sequential growth rate shows solid momentum. Double-digit percentage sequential revenue growth rates have become more common in the AI hardware space; for example, such a trend preceded Micron‘s incredible share price run.
Management’s guidance is already pointing to meaningful growth from here. The $360 million midpoint of the guidance range for Q2 revenue implies 16.7% sequential growth. However, if recent history is any indicator, the actual growth rate may be closer to 20%. Astera Labs told investors to only expect up to $297 million in Q1 revenue, and yet it delivered $308.4 million.
Although the stock has almost doubled this year, it’s also down by roughly 33% from its peak over the past few weeks, which presents a good buy-the-dip opportunity.
3. Cadence Design Systems
Cadence Design Systems (NASDAQ: CDNS) is off to a slower start than the other AI stocks on this list. It’s up by almost 20% this year, driven by wins in electronic design automation software and hardware among chipmakers. These solutions enable companies like Nvidia and Advanced Micro Devices to test and build semiconductors before sending their designs to the third-party foundries that manufacture them.
Its growth rates are more moderate than the other two picks, but it sports a record $8 billion backlog. Cadence Design Systems also told investors to expect 17% revenue growth for 2026.
Agentic AI is set to be a major tailwind for the company. Its technology makes it easier to design advanced AI chips that can handle more rigorous workloads than those currently in data centers. That makes it a key checkpoint for AI chips, and that market can support revenue growth and profit margin expansion, which in turn would make the stock more attractive.
Should you buy stock in Monolithic Power Systems right now?
Before you buy stock in Monolithic Power Systems, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Monolithic Power Systems wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $371,842!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,244,783!*
Now, it’s worth noting Stock Advisor’s total average return is 900% — a market-crushing outperformance compared to 207% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Cadence Design Systems, Micron Technology, Monolithic Power Systems, and Nvidia. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.
