By Super Micro Computer Inc. (SMCI) has emerged as the frontrunner in the highly competitive market for AI-dedicated servers. The company’s impressive performance in the December quarter has exceeded all expectations. With its strong presence in the server industry, Supermicro has garnered a larger market share, primarily due to its collaboration with Nvidia Corp. and an undisclosed major client, speculated to be Meta Platforms Inc. (META). Meta’s CEO, Mark Zuckerberg, recently emphasized plans to enhance their computer infrastructure, aiming to support generative AI with 350,000 of Nvidia’s H100 chips.
An analyst at Rosenblatt Securities, Hans Mosesmann, highlights Supermicro’s unique selling point that attracts customers – the capability to rapidly deploy “liquid-cooled racks.” This innovative cooling technique, originally used in the supercomputer domain, offers a more energy-efficient solution than traditional air cooling when managing multi-rack servers. As Mosesmann stated, “Liquid cooling in the data center is a must-have for next-generation AI compute hardware.”
Following the news of an estimated revenue projection increase of approximately $800 million for this quarter, Supermicro’s shares have skyrocketed by about 40%. The company has refrained from commenting further, citing their current quiet period before revealing their fiscal second-quarter results on January 29th.
According to recent data from IDC, in the $32 billion server market, Supermicro secured its position as the fourth-largest server vendor worldwide. Having surpassed Lenovo in the second quarter of 2023, Supermicro continues to grow at a faster pace than the overall server market, which experienced a mere 0.5% growth in the third quarter of 2023.
Also read: Nvidia is no longer Morgan Stanley’s top chip pick. A much different name is.
Supermicro Sees Impressive Revenue Growth in Third Quarter
According to data from IDC, Supermicro, a leading server maker, witnessed a significant revenue growth of 12.6% in the third quarter. This stands out when compared to major players like Dell Technologies Inc. and Hewlett Packard Enterprise Co., who experienced double-digit declines during the same period. IEIT Systems Co. Ltd. of China secured the third spot with a remarkable growth of 24.9%.
One of Supermicro’s key strengths is its strong partnerships with chip makers in Silicon Valley, including Nvidia, Intel Corp., and Advanced Micro Devices Inc. These relationships, which have developed over decades, have helped Supermicro become a prominent player in the industry. Last year, the collaboration between Supermicro’s CEO Charles Liang and Nvidia’s CEO Jensen Huang was showcased at Computex in Taiwan, where they discussed high-performance computing and AI data centers.
However, analysts like Matt Bryson from Wedbush Securities have issued a word of caution regarding Supermicro’s recent positive news. While the company’s earnings forecast indicates stability in operating margins, Bryson points out that any further details will play a significant role in understanding the true extent of this development. He specifically mentions concerns about possible gross margin deterioration if the company has expanded its customer base to include hyperscalers like Meta Platforms.
As Supermicro prepares to release its quarterly results, investors and market observers eagerly await further insights to determine the impact of the recent surge in the company’s stock price.
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