AI Stock Climbs on New Direction — And It’s Not Nvidia!

Supermicro, a major player in the technology sector, has revealed an optimistic forecast, significantly boosting investor confidence. The company is due to report its quarterly earnings on the 30th of January, and the projections are exceedingly promising. The expected revenue has been revised from the initial estimate of between $2.7 billion and $2.9 billion to a whopping $3.6 billion to $3.65 billion, comfortably surpassing the consensus total of $2.84 billion. 

The proposed adjusted quarterly earnings are estimated to range from $5.40 to $5.55 per share, showing a considerable increase from the prior figures of $4.40 to $4.88 per share and far exceeding Wall Street‘s target of $4.55 per share.

This promising forecast is a significant leap from the previous year’s revenue and earnings per share, which stood at $1.8 billion and $3.26 per share respectively. This encouraging news saw the company’s shares soar by 35% to $421 per share, causing several market analysts, including those at Barclays, to raise their price targets for the company.

The surge in Supermicro’s share price is largely attributed to the growing demand for its state-of-the-art liquid cooling solutions, especially among data centers handling AI applications, causing AI stock to jump. The company’s technology not only maintains optimal operational conditions for data centers but also significantly reduces energy consumption by minimizing the use of air conditioning and system fan operation. 

Rosenblatt Securities analyst Hans Mosesmann suggests that the company’s upside is significantly driven by hyperscale engagements that are keen on quickly deploying liquid-cooled racks that align with Supermicro’s expertise.

In addition to Supermicro’s success, Taiwan Semiconductor, the world’s largest contract chipmaker and a key supplier for Apple iPhones, also projected a rise of around 20% in its 2024 sales after posting a better-than-expected fourth-quarter profit. This projection was primarily fueled by the anticipated growth in AI-chip sales. Similarly, Supermicro in May launched liquid-cooled Nvidia‘s HGX H100 rack scale solutions to help data centers reduce power consumption, a matter of importance as training and operating AI apps require significant energy.

Supermicro’s CEO, Charles Liang, believes that the ongoing AI revolution will have a profound impact, potentially greater than the Industrial Revolution over 200 years ago. 

Addressing the company’s “green computing mission”, he emphasized Supermicro’s commitment to high power efficiency systems and liquid cooling technology, which he considers key differentiators of the company’s success. He anticipates that up to 20% or more of global data centers will transition to liquid-cooled solutions in the coming years. This shift, he believes, will result in increased computing density, lower total cost of ownership, and a significant reduction in the environmental impact of data centers. A development of utmost importance in an era marked by significant AI research and development, and invest into AI stock.