Super Micro Computer Inc (NASDAQ:SMCI) participated in the 52nd Annual JPMorgan Global TMC Conference on Monday, where CFO David Weigand shared insights into the company's growth trajectory and future prospects. Analyst Samik Chatterjee, CFA, highlighted key takeaways from their discussion.
Investment Cycle in AI
SMCI believes that the investment cycle in AI is just beginning and refutes concerns of a bubble. The company sees significant growth potential, especially as investments in AI infrastructure expand beyond the US. SMCI emphasized the benefits of accelerated computing in various sectors, such as drug analytics and weather forecasting, indicating sustained demand.
Partnerships And Expansion
SMCI has collaborated with a range of partners, beyond Nvidia Corp (NASDAQ:NVDA), but including Intel Corp (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD), to incorporate the latest technologies into its servers. These partnerships should help SMCI achieve a strong pipeline of products and upside in both pricing and volumes, the analyst writes.
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SMCI is poised to significantly expand its rack capacity, with 40% of its allocation dedicated to liquid cooling. By the end of June 2024, the company aims to reach a capacity of 5,000 racks per month, with 2,000 racks per month being liquid-cooled. The company intends to position itself as an early adopter and volume provider of liquid-cooled racks, Chatterjee notes.
Leveraging S&P 500 Inclusion To Raise Capital Via Debt
SMCI is considering unsecured debt as an option for future capital raises. With strong demand for AI servers and extended lead times for critical components like GPUs, SMCI has historically used equity and convertible bonds to pre-buy inventory.
However, with its recent inclusion in the S&P 500 and a profile similar to an investment-grade company, SMCI sees unsecured debt as a viable option for raising funds in the future.
Investors are advised to monitor SMCI's progress closely as it executes its expansion plans and capitalizes on emerging opportunities in the AI space.