Super Micro Computer Inc., which has a strong capacity to sell servers loaded with many Nvidia chips, is seeing growth rates similar to the chip giant, leading investors to question how long the artificial intelligence boom could last.
The question applies more to Supermicro SMCI,
From Nvidia because, by definition, the computer and server maker is in the commodity business. nvidia out of stock,
It designs its own graphics processor chips that are in high demand for AI applications, while the servers that power them can be interchangeable parts.
But Supermicro CEO Charles Liang told Wall Street analysts on Monday that he believes the amazing growth is just beginning.
“Overall, I feel very comfortable that this boom will continue for several more quarters, if not many years,” Liang said on the company's call with analysts, following the company's strong quarterly results and massive forecasts. In the second quarter, revenues increased by 103%. He noted that Supermicro's fiscal second-quarter revenue of $3.66 billion exceeded the company's full-year revenue of $3.5 billion in the entire 2021 fiscal year.
Supermicro's guidance for the fiscal third quarter ending in March calls for revenue of $3.7 billion to $4.1 billion, with growth of about 204% at the midpoint. For fiscal 2024, Supermicro raised its revenue guidance to a range of $14.3 billion to $14.7 billion, up 103% at the midpoint.
“Demand is stronger than supply,” Liang told analysts. “If we have
More supplies we may be able to ship more. The company has said in the past that it has close relationships with most Silicon Valley semiconductor companies, including Nvidia, and that it is able to ship its servers with new chips faster than rival server makers. She also said Monday that its architecture gives it another advantage.
“We are quickest to market because of the way we designed our products,” said David Wiegand, CFO of SuperMicro. “What that means is there's a lot of new technologies coming from a lot of different technology providers. We expect to be first to market with those. That first-to-market advantage helps us, helps us differentiate ourselves when we come out with a full suite of solutions.”
Some analysts on the company's call expressed some concerns about lower gross margins, and Weigand said that on some occasions, Supermicro will try to win new customers and more market share with pricing. “we
It grows very quickly. And in order to do that, in order to gain market share, we'll take opportunities, you know, by being more price competitive.
He also pointed to two unnamed existing customers that represent a significant portion of Supermicro's revenue this quarter: a large data center customer (believed to be Meta Platforms Inc. META,
) represents 26% of revenues, and others represent 11% of revenues.
Without naming Dell Technologies, Supermicro executives highlighted the advantages of their systems over the company's main competitors.
hewlett Packard Enterprise HP E,
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And Lenovo. In fact, Supermicro gained market share last year, according to IDC, leapfrogging Lenovo to become the No. 4 global server supplier in the second quarter of 2023.
Read more: Why Supermicro is clearing the floor with the competition.
But as with everything that rises too quickly, after all that growth, investors will be nervous about when the decline will start. In the case of computer server makers, these concerns are completely justified.
Just as Sun Microsystems became the server vendor of choice during the dot-com boom, Supermicro is clearly gaining a similar status in the age of artificial intelligence. But it also needs to avoid a similar fall.
