Super Micro Computer (SMCI 1.18%) has already been winning thanks to demand in the artificial intelligence (AI) space. The company, a seller of servers, workstations, and full rack scale solutions, has been around for 30 years -- but growth actually took off just a few years ago as companies began to invest in AI. This has helped Supermicro's earnings soar. And earlier this year the company reported its first $3 billion quarter -- an amount that represented full-year revenue as recently as 2021.
All of this has helped Supermicro stock to soar. The shares even outperformed those of AI chip giant Nvidia in the first half -- gaining 188% while Nvidia advanced 149%. But I don't think Supermicro's growth will stop here. Instead, my prediction is this company will become one of the biggest AI winners by 2030, and this is thanks to one particular trend.
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Soaring demand from AI customers
First, a little background on Supermicro's path so far. As mentioned, the company is an equipment maker, and these days, demand from AI customers is soaring. They order Supermicro's servers and other products, fully customized and ready for business upon delivery, for their AI data centers.
Supermicro's equipment contains many common parts, allowing the company to quickly and easily tailor systems to a customer's needs. The equipment maker also works closely with top chipmakers like Nvidia and Advanced Micro Devices so that when they launch a new chip, it can immediately be integrated into Supermicro's platforms. This has helped Supermicro deliver growth that's 5 times faster than the industry average over the past 12 months.
Now, let's consider this one particular trend that could supercharge growth through the end of the decade -- and that's the world's massive investment in data centers. Goldman Sachs predicts $1 trillion will be spent on them over the next several years, and Nvidia CEO Jensen Huang has also predicted trillions of dollars in spending in the area through 2030.
In particular, AI customers, dealing with the heat generated by high-powered AI systems, will be looking for a way to handle this in their data centers. And that's where Supermicro comes in. The company's direct liquid cooling (DLC) systems, in existence for 30 years, now may have their chance to shine. These multipart systems can be integrated in any of Supermicro's products. As an example of how they work, consider the direct-to-chip DLC solutions -- they include cold plates that are placed on top of central processing units or graphics processing units, and coolants flowing through cool down these chips.
NASDAQ: SMCI
Key Data Points
Cutting energy costs by 40%
The advantage of DLC? It cuts electricity costs for the entire data center by as much as 40% and reduces data center server noise by as much as 55%. The energy efficiency results in cost savings for the customer, while the act of cooling also results in smoother and safer operations. So it's clear that cooling technology will be a key component of AI data center investing as this technology progresses.
Supermicro's DLC started out at a sluggish pace and continued that way for a long time -- market share grew from about 0% to less than 1% over the past 30 years, according to the Taipei Times, citing a presentation by the CEO at the Computex event in June. But this looks set to change. Now, the company expects market share to grow to as much as 30% over the coming year or two.
In recent earnings reports, Supermicro has said it's seen record demand for its AI rack scale solutions including DLC. And considering the forecast spending on AI data centers in the years to come and the necessity for cooling, it's reasonable to be optimistic about demand continuing at high levels. This is why I predict Supermicro will be one of the biggest AI winners by 2030 -- and that makes now a great time to get in on the stock, even after its meteoric rise.
