
- Super Micro Computer, Inc. is poised to benefit from the growing data center market, particularly in liquid cooling, with a 57.3% upside potential.
- The company’s advanced liquid cooling solutions are crucial for handling the increased power densities from AI and large language models, outperforming traditional air-based systems.
- Despite competition from Vertiv, Super Micro’s strategic partnership with Nvidia and robust product lineup position it well for future growth in the liquid cooling market.
- Regulatory scrutiny and filing delays are concerns, but the stock remains undervalued with significant growth potential, supported by Seeking Alpha’s A+ valuation grade.
Investment Thesis
With the data center frenzy likely to go and get bigger in the coming years, one of the key beneficiaries of this frenzy is Super Micro Computer, Inc. (NASDAQ:SMCI). The opportunity lies with Super Micro, particularly in the liquid cooling arena. The advent of large language models (LLMs) and the large-scale deployment of generative AI is giving birth to increased rack power densities in data centers. This fundamentally triggers the need for a transition from necessitating a transition from air-based thermal management systems, which have historically supported rack densities up to 20 kW/rack, to liquid cooling, which can support rack power densities up to 100 kW+/rack. The stock currently offers investors an upside of 57.3% with a target share price of $52.41.
Business Model
Super Micro Computer, Inc. is a Silicon Valley-based server and storage platform maker that serves a wide range of markets, including enterprise data centers, cloud computing, 5G and edge computing. Their product portfolio includes complete servers, storage systems, modular blade servers, blades, workstations, full-rack scale solutions, networking devices, server sub-systems, server management and security software. As enterprises, including Big Tech, focus on minimal power consumption and higher computing output, this creates blistering demand for Super Micro’s servers. The Silicon Valley-based server maker saw its revenue double for the fiscal year ending on June 30, 2024.
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