Super Micro Computer (SMCI): Driving AI Growth through NVIDIA’s Blackwell-Powered Servers

Investment Thesis

TradingKey - Super Micro Computer, Inc. (NASDAQ: SMCI) is a leading player in the AI revolution, designing and manufacturing high-performance servers that power some of the world’s largest AI data centers as well as edge applications like smart factories and 5G networks. FY2025 revenue is projected to reach approximately $22 billion, reflecting robust demand for AI servers and representing a 47% YoY increase. This growth is driven significantly by deployments of NVIDIA’s cutting-edge Blackwell GPUs, for which SMCI has secured a substantial share, around 25% of NVIDIA’s GB200 supply, equating to roughly 10,000 server racks.

Trading at a forward P/E near 22x and with projected revenue growth of 30% in FY2026, SMCI’s stock offers compelling value tied to its AI leadership. Our DCF model estimates a fair value range of $88 to $139 per share, reflecting an optimistic scenario of sustained growth and margin expansion. This positions SMCI as a strong investment opportunity for those seeking exposure to the expanding AI and cloud infrastructure markets.

Source: TradingKey

Financials — Quarterly Highlights (Q3 FY2025)SMCI’s Q3 FY2025 results (ended March 2025) show it’s capitalizing on the AI surge, though navigating Blackwell supply hiccups. With Q4 FY2025 earnings approaching, we’ve used Q3 data and Q4 guidance to reflect SMCI’s momentum.

· Revenue: $4.6 billion in Q3, up 19% YoY, fueled by early Blackwell server shipments. Q4 guidance is $5.6–$6.4 billion, below the $6.81 billion consensus due to delayed Blackwell ramp-up, but still reflecting strong AI demand.

· Adjusted EPS: $0.31 per share in Q3, meeting expectations despite write-downs from older Hopper GPUs. Q4 guidance is $0.40–$0.50, reflecting transition costs.

· Gross Margin: Non-GAAP gross margin dipped to 9.6% in Q3 from 11.8% in Q2, hit by competitive pricing and Blackwell-related expenses such as liquid cooling infrastructure. Q4 is expected to rise to approximately 10%.

· Operating Income: Non-GAAP operating income was $280 million in Q3, with a 6.1% margin, reflecting elevated R&D investments in energy-efficient server technologies like DLC2.

· Net Income: Closer to $109 million In Q3, down YoY due to the transitional phase of Blackwell server deployments.

· Share Repurchases: A $500 million buyback program in 2025 signals confidence in SMCI’s future.

Margin squeeze in Q3 and the cautious Q4 guidance are mainly due to the fact that the production capacity of Blackwell GPU will be gradually released in early 2025, resulting in about $1 billion of revenue not being realized in the first three quarters in time, but being postponed to the late fiscal year 2025 and fiscal year 2026. With the full start of production around February 2025, the company expects a strong recovery in the coming quarters.

Company Overview

Founded in 1993 in San Jose, California, Super Micro Computer designs high-performance servers for AI, cloud, and edge applications like 5G and smart cities Customers can customize these servers by choosing processors, memory, and cooling systems to fit their needs. 

SMCI’s Data Center Building Block Solutions (DCBS), launched in 2023, is a one-stop shop for AI data centers, offering pre-configured racks with GPUs, storage, networking, and software to cut setup time by 30%. Its Direct Liquid Cooling 2.0 (DLC2) makes servers whisper-quiet and saves 40% on energy and water, appealing to green-focused clients.

SMCI partners with NVIDIA for Blackwell GPUs, Intel and AMD for CPUs, and Ericsson for 5G edge connectivity, serving hyperscalers (AWS), AI companies (xAI), and enterprises worldwide from factories in the U.S., Taiwan, and Malaysia.

Source: SMCI

Competitor Analysis

The global server market experienced extraordinary growth fueled by AI and GPU-driven demand. SMCI holds approximately 6.5% to 10.5% of the global server market in 2024, closely trailing or statistically tied with Dell Technologies which leads with about 7.2% revenue share, according to IDC. Hewlett Packard Enterprise (HPE) and Lenovo follow with roughly 5.5% and 4.9%, respectively. Smaller players like Foxconn and Quanta challenge in Asia. Although SMCI’s gross margin is lowest due to upfront costs tied to innovative liquid cooling technologies, its revenue growth is significantly higher than competitors due to AI demand.

Source: As of Mar. 2025, StockAnalysis, TradingKey

SMCI’s advantages include rapid deployment of NVIDIA’s latest GPUs (H100 in 2023 and Blackwell in 2025) and its modular Data Center Building Block Solutions platform, which give it an edge in speed and flexibility. However, SMCI’s smaller scale and reliance on NVIDIA’s supply chain leave it vulnerable to giants’ counter-moves.

Revenue Breakdown (Q3 FY2025)

Server and Storage Systems ($4.46 billion, 97%): Up 20.6% YoY, driven by Blackwell-powered AI servers and storage for hyperscalers like AWS and AI firms like xAI. This segment’s dominance reflects SMCI’s focus on high-performance AI infrastructure.

Subsystems and Accessories ($141 million, 3%): Down 7.24% YoY, including server boards, chassis, and power supplies. Growth slowed due to timing shifts of customer purchases into Q4, higher inventory reserves for older generation products, and macroeconomic challenges.

Source: SMCI, TradingKey

United States (60%, $2.77 billion): SMCI’s largest market, up 3% YoY, driven by hyperscalers like AWS and Microsoft, as well as AI startups. The U.S. growth reflects strong demand for Blackwell-powered AI infrastructure.

Asia (30%, $1.35 billion): Up 77% YoY, led by robust demand from China, Taiwan, and Japan for AI and 5G technologies. Asia's strong growth significantly contributes to SMCI’s global expansion.

Europe (6%, $290 million): Revenue declined about 2.5% YoY; however, ongoing cloud expansions and the notable $20 billion DataVolt data center deal in Saudi Arabia highlight important strategic investments and growth opportunities in the region.

Rest of World (4%, $187 million): Revenue surged 83% YoY, driven primarily by strong demand in smaller markets such as Latin America.

Source: SMCI, TradingKey

Growth Potential

SMCI is riding three massive tech waves: AI, cloud computing, and edge computing. The AI hardware market, worth $200 billion today, is expected to grow 20% annually by 2030, and SMCI is perfectly positioned. Its servers, optimized for NVIDIA’s latest GPUs like Blackwell and upcoming GB300, are in high demand as companies like AWS, Google Cloud, and Microsoft Azure build bigger AI-ready data centers. For instance, SMCI’s ability to quickly roll out Blackwell-based servers, despite a late start compared to some competitors, shows its knack for fast innovation. Its liquid cooling tech is another ace up its sleeve, as newer AI chips like Blackwell generate tons of heat, and SMCI can produce over 5,000 liquid-cooled racks per month.

Beyond AI, SMCI is tapping into the $50 billion edge computing market, growing at 15% a year, as 5G and IoT devices need compact, efficient servers for things like smart factories or autonomous vehicles. Its new Malaysia facility boosts its capacity to meet global demand, and partnerships like the one with Saudi Arabia’s DataVolt signal growing interest from emerging markets. Plus, SMCI’s eco-friendly designs help data centers save power, a big deal as energy costs and sustainability concerns rise. With these tailwinds, SMCI could see 30% revenue growth in 2026, especially as Blackwell shipments ramp up.

Valuation

Using our discounted cash flow (DCF) model, we estimate SMCI’s intrinsic value to be between $88 and $139 per share, reflecting a scenario of strong growth and favorable margin expansion.

Currently, SMCI trades at a forward P/E ratio of around 22x, which is attractive relative to peers such as NVIDIA, trading near 36x, reflecting SMCI’s compelling growth prospects with an expanding GPU-focused product portfolio. However, to justify this premium valuation, SMCI must continue delivering consistent earnings growth and successfully execute its growth strategies.

Risks

SMCI faces several challenges:

· Blackwell Supply Delays: NVIDIA GPU shortages have slowed SMCI’s AI server shipments and may continue to constrain growth.

· Competition: Larger rivals like Dell and HPE could erode market share if they match SMCI’s technological advances.

· Margin Pressure: Launch costs and pricing wars are squeezing profits, especially with delays in higher-margin liquid-cooled rack sales.

· Governance Issues: Auditor resignation and SEC filing delays in 2024 raise investor concerns, despite no fraud findings.

· Economic Slowdown: A global recession could reduce IT spending, hurting server demand and growth.

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