AI winners at a glance: Who actually is Supermicro Computer?

• NVIDIA the best-known beneficiary of the AI ​​boom
• Supermicro shares also have a phenomenal rally
• Server provider impresses with fair evaluation with great AI potential

The topic of artificial intelligence has become indispensable since the success of the text robot ChatGPT from OpenAI. One of the biggest beneficiaries of the AI ​​hype this year is clearly the chip giant NVIDIA. Investors reacted euphorically when NVIDIA CEO Jensen Huang announced during the presentation of the first quarter balance sheet in May that the company would report sales of eleven billion US dollars in the second quarter of the year. The joy was even greater when sales of $13.5 billion were revealed in August as part of the quarterly presentation. This can also be clearly seen in the phenomenal performance of NVIDIA shares on the NASDAQ this year. It has already increased by almost 200 percent since the beginning of the year. The company is now worth more than a trillion US dollars on the stock market.

Supermicro Computer as AI winner

Against this background, however, there are already numerous stock market investors who are warning against overvaluation of NVIDIA shares. And so numerous market experts are looking for other AI beneficiaries who could go even further. One company that has already benefited from the boom in artificial intelligence, but still appears to be fairly valued, is the server provider Supermicro Computer. According to the company’s website, the company is a leader in “application-optimized, high-performance server and storage solutions.” Specifically, the company sells server and storage solutions for data centers and large companies. While other AI profiteers produce individual components such as RAM or GPUs for SK hynix and NVIDIA, Supermicro installs them in server racks and sells them as a package to customers. Accordingly, Supermicro customers receive fully comprehensive IT server solutions that are specifically tailored to the needs of the company.

Increase in sales in the fourth fiscal quarter of 2023 and fiscal year 2023

Now that many companies are integrating AI software into their own operations, there is a need for servers to be upgraded to handle the compute-intensive technology, which Supermicro benefits from. In August, the company reported on its results for the fourth quarter of 2023 and the fiscal year of 2023. According to this, sales in the fourth quarter increased by 34 percent year-on-year to $2.18 billion. Sales for the entire fiscal year rose by 37 percent to $7.12 billion.

The outlook for the following quarter and the new financial year was cautiously optimistic. Supermicro expects sales growth of 19 percent to between $1.9 and $2.2 billion for the first fiscal quarter of 2024. For the 2024 fiscal year, the company is targeting sales of $9.5 to $10.5 billion, which would correspond to an increase of 47 percent compared to the previous year.

The Supermicro share has already achieved a massive price increase on the NASDAQ this year. The share has already gained more than 200 percent since the beginning of the year.

Fair review

What speaks in favor of Supermicro stock is its low P/E ratio compared to AI top dog NVIDIA, argues MarketBeat’s Pat Crawley. Because where the tech giant has a ratio of 108.18, the server provider only has a value of 25.25. In addition, the company has developed its own server building block architecture that can be quickly adapted to any new innovation in the rapidly evolving AI field and is applicable to a wide range of different markets, as Supermicro explains on its website. In addition to artificial intelligence, possible areas of application also include cloud computing, data centers, big data, 5G and IoT. This means that the company not only benefits from the AI ​​boom alone, but is also broadly positioned in other technologies.

Big competition

On the other hand, Supermicro faces great competition. In contrast to designers of proprietary chips such as NVIDIA, the company does not produce its own semiconductors, but rather installs other companies’ products in its server racks. However, as Crawley argues, the market here is already highly competitive and includes established tech giants such as HP, Lenovo and Dell.

Barclays analyst gives Overweight rating

Barclays analyst George Wang, however, is optimistic for Supermicro. He recently added Supermicro shares to his rating with an overweight rating, as Investor’s Business Daily reports. His price target of $327 is well above the last closing price of $288.86. “Against the backdrop of AI investment trends, we assume that SMCI [Supermicro Computer, Anmerk. d. Red.] is well positioned to capture the growing opportunities around AI servers,” Wang is quoted as saying. In his view, the company is likely to capture more market share thanks to “superior design capabilities and strong AI partnerships.” Like Supermicro in the most recent As stated in its quarterly presentation, the company has close strategic partnerships with NVIDIA, Intel and AMD.

The analyst sees particular potential in Supermicro’s manufacturing facility in Malaysia, which is scheduled to come online in the second half of the 2024 financial year and could double the company’s global capacities. As the server provider revealed in the latest figures presentation, the company is currently struggling with delivery bottlenecks. Specifically, the IT service provider said there were difficulties in getting enough AI chips from NVIDIA, as MarketWatch reports. Wang is nevertheless confident that the bottlenecks will no longer be a problem in the short term: “Based on our channels from Asia, we find SMCI’s guidance for the September quarter to be very conservative. We expect a positive advance announcement around the third week of October. We “We believe this could be the biggest near-term potential catalyst,” Wang said.

However, it remains to be seen whether Supermicro can live up to the high expectations.

Editorial team finanzen.net

This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.

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