Super Micro banks on ties to Nvidia
• Group to gain AI server market share, say analysts
Super Micro Computer joined the S&P 500 on Monday.
The US tech company enjoys a rare advantage among server makers that are trying to tap the generative AI boom — close ties with Nvidia that help it launch products faster than rivals Dell and Hewlett Packard Enterprise.
Super Micro Computer has historically been among the first to receive artificial intelligence (AI) chips from Nvidia and Advanced Micro Devices as it helps them check server prototypes, giving it a head start over rivals, analysts and industry experts said.
That has helped turn the company into a key supplier of servers which are essential for generative AI apps. It has also sent Super Micro’s shares up 289% so far this year.
Some analysts estimate Super Micro, whose California headquarters is less than 16km away from those of Nvidia and AMD, can within just “a few weeks” manufacture, assemble, test and ship a server rack, if components are available.
“Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out from Nvidia or AMD or Intel,” said Hans Mosesmann, an analyst at Rosenblatt Securities.
Super Micro’s revenue more than doubled in the last three months of 2023, and analysts expect triple-digit percentage growth to continue until at least the September quarter of 2024.
Bank of America analysts estimate the company’s AI server market share will grow to about 17% in 2026, from 10% in 2023. That optimism is reflected in Super Micro’s growing market value, which now stands at $60bn, compared with about $5bn before the launch of ChatGPT in November 2022.
The AI demand has also lifted Dell stock by 40% this year, including a gain of about 32% earlier this month after an upbeat annual forecast. HP Enterprise shares are down about 1% in 2024.
But the rally also means that Super Micro is now trading at 40 times expected earnings, far higher than its price-to-earnings (PE) ratio of 15 last December, according to London Stock Exchange Group data.
LIQUID COOLING
289%
the increase in Super Micro’s share price this year
17%
analyst estimates of the group’s share of the AI server market by 2026
Super Micro is also riding on a rush of demand for liquid cooling tech from data centre operators deploying much hotter and more power-hungry AI chips, analysts and industry experts said.
They added that the heat produced by chips used in AI servers has more than doubled and is set to double again in the next two to three years.
Super Micro’s tech, developed in-house, involves putting cold liquid over a plate placed on top of a chip and cuts power consumption by about 40% compared with air cooling.
By 2030, liquid cooling is projected to become the dominant method for cooling servers, said Ben Smith, product head at immersion cooling technology provider Green Revolution Cooling. HP Enterprise and Dell, however, expect the adoption of liquid cooling to be much lower.
Analysts also cautioned it could be tough for Super Micro to maintain its advantage in AI servers as larger rivals shift focus to the market, adding that the company has been offering its products at cut-price rates to gain market share.