NVIDIA Partner Supermicro Jumps 4% on Strong Q2 Growth, Nvidia AI Demand

Super Micro Computer Inc. (SMCI), a leading provider of AI and data center solutions, has seen its shares surge by 4% in extended trading following the release of its preliminary Q2 FY2025 financial results. The strong performance can be attributed to robust demand for NVIDIA's AI solutions and Supermicro's own growth in the AI infrastructure market.



Supermicro's preliminary Q2 FY2025 results paint a promising picture, with net sales expected to reach between $5.6 billion and $5.7 billion, representing a 54% year-over-year growth at the midpoint. The company's GAAP gross margin is projected to be in the range of 11.8% to 11.9%, while GAAP diluted net income per common share is expected to be between $0.50 and $0.52, flat year-over-year. Non-GAAP diluted net income per common share is projected to be between $0.58 and $0.60, reflecting a 5% year-over-year growth.

The strong Q2 growth can be attributed to several factors, including:

1. Increased demand for AI hardware: More than 70% of Supermicro's revenues in Q2 were for AI systems, consistent with the levels seen in the prior two quarters. This indicates a strong demand for AI hardware, driving the company's revenue growth.
2. Adoption of direct-liquid cooling technology: Over 30% of new data centers are expected to adopt direct-liquid cooling technology in the next 12 months. This technology is a key differentiator for Supermicro, enabling it to grow AI infrastructure design wins and expand its leadership in the US-based data center infrastructure solution provider market.
3. NVIDIA Blackwell platform: Supermicro's ramping to "full production availability" of its AI data center solutions platform, accelerated by the NVIDIA Blackwell platform, contributed to the revenue growth. The Blackwell platform is expected to drive more sales and extract more profits for Supermicro.

While Supermicro's Q2 results are encouraging, investors should remain cautious about the company's long-term prospects. The ongoing SEC and DOJ investigations, coupled with delayed financial filings, create additional uncertainty and compliance costs. Additionally, the company's recent downward revision of its FY2025 revenue guidance raises concerns about its execution capabilities and market dynamics.

In conclusion, Supermicro's strong Q2 growth and increased demand for NVIDIA AI solutions align with the company's long-term investment thesis, focusing on fundamentals over short-term market noise. However, investors should remain vigilant and monitor the company's progress closely, as regulatory headwinds and execution challenges may impact its long-term sustainability.