Think Nvidia has been the star semi performer over the past year? Think again. Shares of Super Micro Computer (NASDAQ:SMCI) have completely obliterated the chip giant’s performance, climbing 764% higher over the past 12 months.
But it’s not as if those gains have actually come at the expense of Nvidia as the two aren’t really rivals. In fact, the pair have a symbiotic relationship; Supermicro offers sophisticated server and storage systems tailored to efficiently manage the rigorous workloads characteristic of AI applications such as ChatGPT. Supermicro collaborates with Nvidia, utilizing their chips in the construction of its hardware infrastructure.
And given Nvidia’s recent blowout earnings, and its comments regarding the server space – i.e., demand continues to outstrip supply – Barclays analyst George Wang believes that should prove beneficial to SMCI.
“We think the AI strength is still in early innings and too early to take a cautious view at this point,” the 5-star analyst recently said. “As NVDA increases the new product launch cadence of now once a year, vs. once every other year in the past, it should increase SMCI’s advantage as it will have a list of matching products ready fairly immediately and offer design assistance after NVDA/AMD announce a new product vs. the competition, and may be ready to provide a competing product a few quarters down the road.”
Based on its strategic collaboration with Nvidia, Wang anticipates the “strong momentum will continue in 2024.” The growth will be further fueled by the integration of AMD and Intel GPU chip solutions, as well as by “order penetration” with top hyperscale clients post C2Q24.
Additionally, early adoption of liquid cooling solutions promises higher margins and ASPs. “With liquid cooling expected to reach a 20% mix for data centers, it is an $80B TAM in itself (given a $400B AI TAM by 2027 per AMD) with SMCI having the pole position, in our view,” Wang further said. In certain instances, clients can potentially double their AI computing capabilities by implementing SMCI’s DLC (direct-attached liquid cooling) solution, given the reduced system power demands, improved PUE (power usage effectiveness), and increased computing density per cluster. Wang thinks most of Nvidia’s B100 GPU builds could be liquid cooled.
To this end, Wang rates SMCI shares an Overweight (i.e., Buy) along with a $961 price target, suggesting the stock will climb 9% higher from here. (To watch Wang’s track record, click here)
Overall, SMCI shares have a Moderate Buy rating from the analyst consensus, based on a range of reviews including 5 Buys, 2 Holds, and 1 Sell. However, the $809.5 average target implies shares will see downside of 8% in the months ahead. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
