The Incredible Growth of Supermicro in the Era of Artificial Intelligence
Super Micro Computer Inc., a leading provider of computer and server solutions, has been experiencing remarkable growth comparable to that of chip giant Nvidia. This raises questions among investors about how long this artificial intelligence boom will last. The question is even more significant for Supermicro, as the company operates in a de-commoditized industry.
Unlike Nvidia, which designs its own graphics processing units (GPUs) in high demand for AI applications, Supermicro produces interchangeable servers to support these GPUs.
However, Supermicro’s CEO, Charles Liang, stated to investors that he believes this incredible growth is just the beginning. “Overall, I’m confident that this boom will continue for the next quarters, if not years,” Liang said during a discussion with Wall Street analysts, citing strong quarterly results and the company’s promising forecast. In the second quarter, revenues increased by 103%. Supermicro’s revenues in the second financial quarter reached $3.66 billion, surpassing the company’s total annual revenues for the entire year of 2021, which amounted to $3.5 billion. The forecast for the third financial quarter, ending in March, anticipates revenues ranging from $3.7 billion to $4.1 billion, representing a 204% growth in the midpoint value. For the financial year 2024, Supermicro has raised its revenue forecast to a range of $14.3 billion to $14.7 billion, indicating a 103% growth at the midpoint value.
“Demand is stronger than supply,” Liang told analysts. “If we had more supply, we could deliver more.” The company has previously announced its close relationships with most semiconductor companies in Silicon Valley, including Nvidia, enabling it to ship its servers with the latest chips quicker than its competitors. Additionally, it has been said on Monday that the “building-block” architecture gives the company another advantage. “We are the fastest in the market due to the way we design our products,” said David Weigand, Supermicro’s CFO. “This means a lot of new technologies offered by various vendors are introduced, and we expect to be the first to enter the market with a complete set of solutions.”
While some analysts expressed concerns about declining gross margin during the company’s discussion, Weigand mentioned that Supermicro will occasionally try to gain new customers and market share through competitive pricing. “We are growing rapidly. To achieve that, we must gain market share, and sometimes we will take the risk of being more competitive on pricing,” Weigand said. He also pointed out two existing, undisclosed customers that represented a significant portion of Supermicro’s revenues in this quarter: one being a large data center customer (possibly Meta Platforms Inc.), accounting for 26% of revenues, and another customer representing 11% of revenues.
During the discussion, Supermicro experts emphasized the advantages of their systems over major competitors, without naming Dell Technologies, Hewlett Packard Enterprise, IEIT Systems Co. Ltd., and Lenovo. Indeed, according to IDC, Supermicro gained market share over the past year, surpassing Lenovo and becoming the fourth-largest server vendor globally in the second quarter of 2023.
Undoubtedly, as with any rapid growth, investors are starting to worry about when this growth will end. For computer and server manufacturers, such concerns are quite justified. Similar to how Sun Microsystems became the preferred server provider during the dot-com boom, Supermicro is gaining a similar prestigious position in the era of artificial intelligence. However, it must also avoid a similar downfall.
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The source of the article is from the blog maestropasta.cz