Super Micro Computer (NASDAQ: SMCI) saw its share prices skyrocket by a phenomenal 1,180% in the past year. Fueling this staggering surge is the robust demand for Nvidia’s (NASDAQ: NVDA) artificial intelligence (AI) graphics cards.
Supermicro’s modular server racks, employed to house AI-related graphics cards from Nvidia, have witnessed a dramatic uptick in demand. With Nvidia’s cards surging in popularity, Supermicro has experienced a parallel surge in demand for its server solutions, translating into rapid growth in both top and bottom lines.
SMCI Revenue (Quarterly) data by YCharts
Recent revelations by Nvidia CEO Jensen Huang point towards a continued surge in growth for Super Micro Computer.
Nvidia’s Innovative Cooling Systems to Drive Super Micro Computer’s Success
Nvidia’s flagship AI graphics card, the H100, has been known to perform exceptionally well under air cooling. Yet, the forthcoming H200 processor is anticipated to deliver optimal performance with air cooling as well. However, Huang’s announcement at a Stanford economic summit hints at a new direction – liquid cooling for one of Nvidia’s next-generation computers.
Nvidia’s upcoming AI GPUs based on the Blackwell architecture are anticipated to consume significantly more power than the current Hopper architecture models. Liquid-cooled server systems are poised to address this power surge.
Third-party studies suggest that liquid cooling consumes merely 20% of the energy required for air cooling. This significant reduction in energy consumption not only cuts operating expenses for data centers but also conserves water compared to air-cooled systems.
Supermicro’s proactive stance in launching liquid-cooling solutions for Nvidia’s AI chips demonstrates foresight. The company is ramping up its manufacturing capacity for liquid-cooled server racks. During the recent earnings conference call, Supermicro’s management highlighted plans to expand capacity to cater to the demand for liquid-cooled systems.
The market for liquid-cooled data centers is projected to reach $40 billion in revenue by 2033, up from $4.5 billion last year. Supermicro’s strategic focus on liquid-cooled servers positions it to capitalize on this burgeoning market, auguring well for sustained growth.
Compelling Valuation Makes Investing in Super Micro Computer a Lucid Choice
Despite Supermicro’s remarkable stock surge over the past year, its sales multiple stands at a modest 6.7. This valuation appears attractive compared to the technology sector’s price-to-sales ratio of 7.1. Furthermore, the company’s forward earnings multiple points to a substantial uptick in bottom-line performance, given its trailing earnings multiple.
Projections indicate a significant upswing in Supermicro’s earnings from the previous fiscal year. Analysts have also raised their growth estimates for the company, supported by catalysts like the rising demand for liquid-cooled systems. This favorable outlook underscores the appeal of investing in this forward-thinking AI stock for long-term returns.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
