This artificial intelligence hardware specialist will be able to achieve new heights with his decades of experience.
Many investors were surprised by the speed at which artificial intelligence (AI), a new technology, caught on in the past year. It sparked an upheaval amongst the most powerful companies around the globe. Apple The throne of the king was dethroned MicrosoftThe only company with a current market capitalization of over $3 trillion is. NvidiaThe company’s AI-driven processors have tripled in the last year, propelling it to the third spot behind Apple with $2.6 trillion. Apple is in the No. 3 position with a $2.6 trillion valuation. Alphabet, Amazon” Meta Platforms All of these players are major participants in the AI revolution, and they also belong to this prestigious fraternity.
You can also use a Market cap It may seem hyperbolic to say that the world economy is only $53 billion at this time. Super Micro Computer (SMCI -4.14%)Supermicro could be a contender for the club of $1 trillion. Supermicro’s expertise and the demand for AI servers suggest it is one of the dark horses in this race.
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The stars’ servers
Supermicro, which has created customized server solutions over the past 30 years in relative anonymity, was able to gain traction with AI adoption. Supermicro is a company that has accumulated a lot of experience out of the limelight.
Supermicro’s reputation has been built by offering highly customizable and energy-efficient rack-scale liquid-cooled servers that are designed to handle AI-based datacenters. It has built strong relationships with the leading AI chipmakers and collaborates closely to develop rack-scale server technology that is high-performing, energy-efficient and offers the lowest cost-of-ownership in the industry. The company boasts of partnerships with Nvidia. Advanced Micro Devices” IntelYou can also find a list of other.
It’s a strategy that works, as AI-centric server sales are booming. Supermicro’s second-quarter revenue (ended December 31) in fiscal 2024 grew 103% over the previous year, to $3.7 Billion. Its earnings per share (EPS), which was $5.10, jumped by 85%. The management expects its triple-digit revenue growth to continue. It has raised its guidance for the full year, which is now $14.5 billion. This would be a 104% increase.
Supermicro’s management reports that the company grew at a five-times faster rate than industry standards over the previous 12 months. This suggests the company has been stealing market shares from rivals. Northland analysts agree that the company’s market share has increased to 11%. They say there is “ample room” for future gains.
How to reach $1 trillion
Supermicro occupies a coveted position in the AI server market. It is nimble enough for the company to adapt quickly and it has an extensive history in providing custom server solutions for enterprises. Supermicro’s strong, long-lasting relationships with chipmakers have given it an inside track to the AI processors and ensured a plentiful supply. Supermicro will need to achieve a great deal of success to become a trillionaire.
Wall Street estimates that Supermicro will generate revenues of $14,7 billion by 2024. This gives it a positive outlook. price-to-sales (P/S) ratio About 3.6. Supermicro, assuming its price/sales ratio remains the same, would need to increase its annual revenue by about $275 billion to reach a market capitalization of $1 trillion. The company’s current production is geared towards supporting annual sales of 25 billion dollars, which means revenue that large is still some way off.
Supermicro’s market capitalization could surpass $1 trillion by 2031 if it can maintain its growth of triple digits year over year. It’s not likely that the company can maintain its current parabolic rate of growth. Supermicro’s revenue could increase by 50% if we lower its growth assumption. Reach a market capitalization of $1 trillion by 2035.
It’s reasonable to expect that the demand for AI servers will remain strong. BofA Analyst Ruplu Bhattacharya predicts that the market for data centers will increase at a CAGR of 50 percent over the next 3 years. Supermicro could see even more rapid growth.
Nvidia’s CEO Jensen Huang has also expressed optimism, predicting that data center installations will reach $2 trillion in the next four or five years.
Supermicro will join the club of $1 trillion companies if it can capture even a tiny part of this vast market.
Suzanne Frey is an Alphabet executive and a board member at The Motley Fool. Randi Zuckerberg is the sister of Meta Platforms’ CEO Mark Zuckerberg and former Facebook spokeswoman and director of marketing. She sits on The Motley Fool’s Board of Directors. John Mackey is a former CEO at Whole Foods Market (an Amazon subsidiary) and he’s a board member for The Motley Fool. Bank of America, an affiliate of The Ascent (a Motley Fool Company), is a partner in advertising. Danny Vena Alphabet has positions in Amazon, Apple Meta Platforms Microsoft Nvidia and Super Micro Computer. The Motley Fool recommends and has positions in Advanced Micro Devices (AMD), Alphabet, Apple, Bank of America Meta Platforms Microsoft and Nvidia. The Motley Fool is a fan of Intel. He recommends these options: Long January 2023 $57.50 call on Intel; long January 2020 $45 call on Intel; long January 2030 $395 calls for Microsoft; and short January 2016 $405 calls for Microsoft. The Motley Fool is a Disclosure policy.