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Valued at a market capitalization of $62 million, ZJK Industrial (ZJK) manufactures and sells precision fasteners, structural parts, and other metal parts products for new energy vehicles, circuit boards, data centers, liquid cooling systems for high-speed supercomputers, and electronic equipment.
ZJK recently went public and is up close to 130% since its September 2024 initial public offering. Despite its solid returns, the hardware stock is priced under $20, which makes it attractive to retail investors. Let’s see if you should buy the artificial intelligence (AI) stock following its big-ticket partnership with Nvidia.
ZJK Inks a Deal With Nvidia
Last week, ZJK announced a strengthening of its partnership with Nvidia (NVDA) for AI-server liquid cooling systems. ZJK confirmed it had received a request to produce samples for a new liquid cooling manifold project. ZJK has formed a dedicated engineering team for this initiative and sees it as a strategic opportunity to expand into assembly manufacturing.
ZJK CEO Ning Ding highlighted Nvidia's positive feedback on existing collaboration and viewed this expansion as a chance to showcase ZJK's capabilities in the growing AI cooling systems market. This partnership reinforces ZJK's position as an approved vendor for Nvidia's liquid cooling systems and represents a significant step in the company's growth strategy.
What's Next for the AI Stock?
Liquid cooling systems are crucial for managing heat in AI computing environments and offer several advantages, including superior heat dissipation, support for high-power graphics processing units (GPUs), improved space and efficiency, enhanced hardware reliability, and reduced failure rates.
The top players in the liquids cooling segment include Super Micro Computer (SMCI), which estimates that around one-third of data centers will adopt cooling technologies by 2026. Tech giants such as Meta Platforms (META) are also investing heavily in cooling infrastructure.
Cooling technologies are becoming increasingly important as AI workloads continue to consume more power, making ZJK a top investment choice right now. Super Micro is currently wrestling with regulatory challenges, allowing ZJK and its peers to gain market share.
Is ZJK Stock a Good Buy?
ZJK reported sales of $29.1 million in 2023, up from $24.8 million in 2022 and $17.5 million in 2021. Notably, the company ended 2023 with an operating profit of $6.3 million, indicating a healthy margin of 21.6%. Moreover, it reported a positive free cash flow of $3.7 million in 2023 compared to an outflow of $400,000 in 2022.
Given the lack of earnings visibility right now, long-term investors should wait for a couple of quarters before investing in the stock. Further, it trades at 26x trailing sales, which might be elevated for most investors.
