Share prices of Super Micro Computer (NASDAQ: SMCI) took off up to now 12 months, gaining 1,180% as of this writing, and an enormous reason behind the stock’s red-hot surge is the booming demand for Nvidia‘s (NASDAQ: NVDA) artificial intelligence (AI) graphics cards.
Supermicro’s modular server rack-scale systems are getting used to mount AI-related graphics cards from Nvidia, in addition to other chipmakers. Because the demand for Nvidia’s cards has increased, Supermicro has also witnessed a terrific jump in demand for its server solutions, resulting in rapid growth in the corporate’s top and bottom lines.
And now, a recent revelation from Nvidia CEO Jensen Huang suggests that Supermicro’s eye-popping growth will proceed.
Nvidia’s adoption of liquid-cooled systems should give Super Micro Computer a lift
Nvidia’s current flagship AI graphics card, the H100, reportedly performs well under air cooling. What’s more, the upcoming H200 processor can also be anticipated to perform optimally while being air-cooled, in accordance with Tom’s Hardware. But at an economic summit at Stanford this week, Huang said that one in every of Nvidia’s next-generation computers goes to be liquid-cooled.
Nvidia’s next-generation AI graphics processing units (GPUs) based on the Blackwell architecture are expected to devour 40% more power than the prevailing offerings based on the Hopper architecture. In line with another claims, Nvidia’s next-generation AI chips could even devour double the facility of the present lineup. That is where liquid-cooled server systems are going to come back into the image.
When launching what Supermicro claimed to be the primary liquid-cooled server systems for Nvidia’s H100 processors last 12 months, the corporate said:
Savings for an information center are estimated to be 40% for power when using Supermicro liquid cooling solutions in comparison with an air-cooled data center. As well as, as much as 86% reduction in direct cooling costs in comparison with existing data centers could also be realized.
A have a look at third-party studies suggests something similar. Liquid cooling reportedly consumes just 20% of the energy required for air cooling. In other words, liquid cooling is thought to scale back energy consumption in data centers significantly, while also helping reduce operating expenses through the use of less water than air-cooled data centers.
Supermicro seems to have been ahead of the curve, because it took the initiative to launch liquid-cooling solutions for Nvidia’s AI chips last 12 months. The corporate is now working to spice up the manufacturing capability of liquid-cooled server racks. On its January earnings conference call, Supermicro management remarked: “By this June quarter, we may have high-volume, dedicated capability for manufacturing 100-kilowatt to 120-kilowatt racks with liquid-cooling capabilities, providing DLC, direct liquid cooling racks capability, as much as 1,500 racks monthly, and our total rack production capability will likely be as much as 5,000 racks monthly by then.”
The corporate’s deal with expanding its capability of liquid-cooled servers won’t only let it benefit from Nvidia’s power-hungry AI chips but additionally allow it to make a dent within the fast-growing marketplace for liquid-cooled data centers as an entire. The liquid-cooled data center market is anticipated to generate annual revenue of $40 billion in 2033, compared with just $4.5 billion last 12 months, clocking an annual growth rate of 24% over the subsequent decade.
As such, it won’t be surprising to see Supermicro maintaining its healthy pace of growth for a very long time to come back.
The stock’s valuation makes buying it a no brainer
Though Supermicro has been on a tear on the stock market over the past 12 months, its sales multiple stands at just 6.7. That is cheaper than the technology sector’s price-to-sales ratio of seven.1. Furthermore, Supermicro’s forward earnings multiple of 36 points toward an enormous jump in its bottom line, considering its trailing earnings multiple of 84.
As the next chart suggests, Supermicro’s earnings are set to take off big time from the previous fiscal 12 months’s reading of $11.81 per share.
It is also value noting that analysts have raised their earnings growth expectations from the corporate, and there is a superb probability that they might keep raising those estimates considering added catalysts similar to the growing demand for liquid-cooled systems. That is why now can be a superb time for investors to purchase this AI stock, because it seems able to sustaining its stunning rally in the long term.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Nvidia. The Motley Idiot has a disclosure policy.
Nvidia Just Dropped Great News for Super Micro Computer Stock was originally published by The Motley Idiot