Nvidia has once again surpassed sky-high expectations in its latest quarterly readout, allaying any fears of difficulty in meeting them. The company cleared that obstacle by delivering a beat-and-raise report, which sent its shares soaring in the subsequent session. Beyond the benefits to its own share price, the AI giant’s strong report has positive implications for Super Micro Computer (NASDAQ:SMCI), says Bank of America analyst Ruplu Bhattacharya.
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According to Bhattacharya, the demand for AI-driven accelerated computing remains robust, extending its influence beyond cloud service providers (CSPs) to include consumer internet companies, enterprises, and even sovereign AI initiatives.
But how does that pertain to SMCI? Well, Bhattacharya thinks the company stands to gain from the rising demand as it “1) remains well positioned with tier-2 CSPs like CoreWeave who are seeing strong demand and are expanding globally, 2) has pockets of strength in enterprise in specific verticals like financial services, drug discovery and autonomous vehicles, and is investing to expand its sales, marketing and customer engineering teams, and 3) is in early discussions with sovereign entities who are looking for a partner who can customize their AI setup to maximize performance from the hardware, while providing attractive price/performance.”
Another competitive advantage SMCI has is its ability to provide “liquid cooling at scale.” Currently, just 1% of datacenters use liquid cooling, but the company anticipates that in the next 12-18 months, that will increase to 20%. SMCI has a substantial order for liquid-cooled racks scheduled to ship in the current fourth fiscal quarter. By the June quarter’s close, it is anticipated to have the capacity to ship up to 2,000 liquid-cooled racks per month, within a total monthly shipment capacity of 5,000 racks.
One issue that investors should be aware of revolves around the risk of not having enough components available. On Nvidia’s earnings call, the company noted that demand for the H200 and Blackwell GPU architecture remains far ahead of supply and could stay that way “well into next year.” Recall, SMCI slightly missed consensus revenue estimates last quarter due to a shortage of components, including GPUs, power supplies, network cards, and some parts related to liquid cooling.
Nevertheless, all in all, Bhattacharya rates SMCI shares a Buy, while his price objective of $1,090 suggests the stock will surge 22% in the year ahead. (To watch Bhattacharya’s track record, click here)
That target is almost identical to the Street’s average, which stands at $1097.78. On the rating front, the stock claims a Moderate Buy consensus view, based on a mix of 6 Buys and 4 Holds. (See SMCI stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
