The San Jose, Calif.-based IT company will leave the S&P MidCap 400 for the S&P 500 on Monday. When we say "green," we mean it. Super Micro develops high-end AI servers, and now that AI is hot, Wall Street loves the company. Super Micro shares rose 1,000% in 2023, from $285.45 on Jan. 2 to $1,188.07 on March 13.
AI will help the server industry grow, according to Bank of America. According to the business, the server market grew revenues at 5.4% and units at 2.8% from 2006 to 2023. "We model the overall server market growing revenues double-digits (about 23% CAGR) between 2023-2027, while server units grow at high-single digits (8.6% CAGR) in the same timeframe," it stated.
BofA sees Super Micro, Dell (DELL), and HPE directly benefiting from AI server demand in its coverage universe. The brokerage maintained a buy rating and boosted its Super Micro price target to $1,280 from $1,040 on March 13.
Based on its semiconductor analyst team's revised outlook for the accelerator TAM, or total addressable market, which helps businesses calculate their maximum revenue if they had 100% market share, BofA's analysts raised their expectations for artificial intelligence server industry growth in a research note.
"We predict industry sales to rise from $39 billion to $200 billion by 2023-2027. Super Micro earned an adjusted $5.59 a share on $3.66 billion in sales in the quarter ended Dec. 31, surprising revenue, earnings, and guidance. This quarter was Super Micro's first with over $3 billion in sales, surpassing its 2021 yearly revenue. FactSet analysts projected Super Micro to earn $5.05 per share on $2.8 billion in sales.
"Overall, I feel very confident that this AI boom will continue for many quarters if not many years," CEO Charles Liang told analysts on the earnings call. "With inferencing and other computing ecosystem requirements, demand can last decades. We may call this an AI revolution."
Liang added demand for AI inferencing systems—where live data is passed through an AI model to forecast or perform a task—and mainstream compute solutions has also increased. BofA noted that Super Micro's building block architecture speeds up technology adoption and market entry.
Analyst unveils AI-linked Broadcom stock price target AI stock jumps on new guidance (not Nvidia) Nvidia CEO Huang discusses massive AI possibilities The company also noted Super Micro's expertise in customizing configurations for specific customer applications and its liquid cooling options, as well as its partnerships with Intel (INTC), Nvidia (NVDA), and AMD (AMD).
Liquid cooling lowers processor and graphics processor temperatures. Super Micro offered convertible senior notes due 2029 to institutional buyers on February 23, according to BofA. Supporting revenue growth with working capital has been the company's main cash demand.
The firm claimed real estate acquisitions require cash and convertible notes without interest. Super Micro raised cash for working capital and business expansion without increasing its annual interest expense through the sale. BofA expects SMCI to continue to grow revenue due to server demand from AI, HPC, big data analytics, engineering/technical workloads, streaming and content delivery, and compute-intensive graphics and online gaming.
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