Why Super Microcomputer (SMCI) Could Be a Hidden Gem for Growth Investors

March 2024, Super Microcomputer (SMCI) It has become the latest artificial intelligence (AI) company. Join the S&P 500 Index, a little more than that It has been one year since it was included in the S&P MidCap 400 in December 2022. SMCI’s stock price has soared more than 2,000% over the past two years, driven by robust demand for its AI computing products, which has led to rapid revenue growth.

Moreover, SMCI’s stock price has surged nearly 205% in the past six months and more than 520% ​​over the past year. The historic stock price rise pushed the company’s market capitalization to over $48 billion.

SMCI is a leading manufacturer of IT solutions and computing products, including storage and servers designed for enterprise and cloud data centers, purpose-built for use cases such as AI, cloud computing, big data and 5G applications. The company has benefited significantly from the ongoing AI boom in the technology sector.

According to a report by ResearchAndMarkets.com, the global AI server market is expected to reach $50.65 billion by 2029. CAGR 26.5% growth During the forecast period (2024-2029).

Specializing in servers and computer infrastructure, SMCI maintains long-term partnerships with leading technology companies, including: NVIDIA Corporation (NVDA), Intel Corporation (INTC)and AMD (Advanced Micro Device)This boosted the company’s profitability and growth.

Let’s discuss Super Micro Computer’s fundamentals and growth prospects in detail.

Recent Strategic Developments

SMCI announced on April 9th. X14 Server Portfolio With future support for Intel® xeon® 6 processors with early access program. Supermicro’s building block architecture, rack plug-and-play, and liquid cooling solutions, along with the breadth of the new Intel Xeon 6 processor family, provide solutions optimized for every workload and size, delivering exceptional performance and efficiency.

The upcoming processor family will be available with Efficient Core (E-Core) SKUs with increased performance per watt and Performance Core (P-Core) SKUs with increased performance per watt for cloud, networking, analytics, and scale-out workloads. The expected. -Core for AI, HPC, storage, and edge workloads.

Additionally, the upcoming processor portfolio features the Intel Accelerator engine with new support for FP16 in Intel Advanced Matrix Extensions.

In the same month, SMCI expanded its edge computing portfolio to accelerate IoT and edge AI workloads with next-generation embedded solutions.

“We are continuing to expand our product line of systems that now include servers optimized for the edge and capable of handling demanding workloads where massive amounts of data are generated.” said Charles Liang, President and CEO of SMCI.

“Our building block architecture allows us to design and deliver a wide range of AI servers that deliver the solutions enterprises need from the edge to the cloud. “Our new Intel Atom-based edge system includes up to 16GB of memory, dual 2.5GbE LAN ports, and a NANO SIM card slot, enabling AI inference at the edge, where most of the world’s data is generated,” Liang added. .

Additionally, on March 19, Supermicro unveiled its latest lineup to accelerate generative AI deployments. that much Supermicro Supercluster Solution Provides the basic building blocks for current and future large language model (LLM) infrastructures.

Full-stack SuperClusters include air-cooled and water-cooled training and cloud-scale inference rack configurations featuring the latest NVIDIA Tensor Core GPUs, networking, and NVIDIA AI Enterprise software.

SMCI also announced a new AI system for large-scale generative AI. NVIDIA’s next-generation data center productsFeaturing the latest NVIDIA GB200 Grace™ Blackwell Superchip, NVIDIA B200 Tensor Core, and B100 Tensor Core GPUs.

Supermicro is accelerating delivery time by upgrading existing NVIDIA HGX™ H100/H200 8-GPU systems for seamless integration with NVIDIA HGX™ B100 8-GPU. The company also augments its extensive range of NVIDIA MGX™ systems with new products featuring NVIDIA GB200, including the NVIDIA GB200 NVL72, a comprehensive rack-level solution with 72 NVIDIA Blackwell GPUs.

Supermicro is also introducing new systems to its portfolio, including the 4U NVIDIA HGX B200 8-GPU liquid-cooled system.

Solid Q3 2024 Results

for third quarter For the year ended March 31, 2024, SMCI’s revenue increased 200.8% year over year to $3.85 billion. Non-GAAP gross profit increased 163.9% year-over-year to $605.9 million. Non-GAAP operating income was $434.42 million, an increase of 290.7% year-over-year.

The server assembler’s non-GAAP net income increased 340% from the year-ago quarter to $411.54 million. Non-GAAP net income per common share was $6.65, an increase of 308% year-over-year.

As of March 31, 2024, Supermicro Computers had cash and cash equivalents of $2.12 billion compared to $440.46 million as of June 30, 2023. The company’s total current assets were $8.06 billion as of June 30, 2023, compared to $3.18 billion.

“The strong demand for our AI rack-scale PnP solutions and our team’s ability to develop innovative DLC designs have enabled us to expand our market leadership in AI infrastructure,” said Charles Liang, President and CEO of Supermicro. We expect to continue to grow our market share as new solutions, including fully production-ready DLC, increase.”

Increased Annual Revenue Outlook

SMCI expects net sales for the fourth quarter of fiscal 2024, ending June 30, 2024, to be between $5.1 billion and $5.5 billion. The company’s non-GAAP earnings per share are expected to be between $7.62 and $8.42.

Supermicro raised its fiscal 2024 sales forecast from $14.3 billion to $14.7 billion to $14.7 billion to $15.1 billion. Non-GAAP earnings per share are expected to range from $23.29 to $24.09.

CEO Charles Liang said he expects AI growth to remain robust for several quarters, if not years, ahead. To support this rapid growth, the company had to raise capital through a secondary offering this year, Liang added.

Meanwhile, finance chief David Weigand said the company’s supply chain was continuing to improve.

conclusion

SMCI’s third quarter fiscal 2024 results were exceptional, with record revenue of $3.85 billion and non-GAAP EPS of $6.65. Its 200% annual revenue growth and 308% year-over-year non-GAAP EPS growth significantly outperformed its industry peers.

After reporting strong financial performance, the company raised its full-year revenue forecast, pointing to robust AI demand.

Super Micro Computer, which joined the S&P 500 in March, has a unique advantage among server manufacturers looking to capitalize on the generative AI boom. In particular, server manufacturers’ close relationship with Nvidia allows them to launch products that outperform competitors such as: Dell Technologies (DELL) and Hewlett Packard Enterprise (HPE).

The company was the first to receive AI chips from NVDA and AMD to help validate server prototypes, helping it stay ahead of its competitors. This has established SMCI as a major supplier of servers critical to generative AI applications, with its stock soaring 192% so far this year.

According to Hans Mosesmann, analyst at Rosenblatt Securities, “Super Micro has developed a model that is very quick to market. They typically have the broadest product portfolio when new products are released from Nvidia, AMD or Intel.”

Bank of America analysts also expect SMCI’s share of the AI ​​server market to increase. Expands to approximately 17% in 2026 Argus analyst Jim Kelleher also appears bullish on SMCI. Kelleher Maintain BUY investment opinion About SMCI stock

According to analysts, Super Microcomputer is a leading server provider in the generative AI era. Along with a wide range of rack and blade servers for cloud, enterprise, data center, and other applications, SMCI offers GPU-based systems for deep learning, high-performance computing, and a variety of other applications.

Given its strong financials, accelerating profitability, and solid near-term growth prospects, investors might consider buying this stock for significant gains.