With year-to-date gains of ~80 percent vs. NVIDIA's ~120 percent, Super Micro Computer (SMCI) shares are often touted as the next best levered bet on the evolving AI thematic bull case. What's more, the manufacturer of high-performance servers is managing to walk the talk vis-a-vis the hype if its soaring revenue-based guidance is anything to go by.
For the benefit of those who might not be aware, Super Micro Computer's biggest client is NVIDIA, and its second-biggest client is an entity that is backed by NVIDIA. This close association explains SMCI's elevated correlation with NVIDIA shares, which remained above 62 percent for much of the past few months and currently stands at 94 percent.
This brings us to the crux of the matter. Earlier this week, Super Micro Computer announced its earnings for its fiscal Q4 2024. While the market was disappointed by SMCI's plunging gross margin, which decreased by 5.8 percent on an annual basis to 11.3 percent as a fierce price war with HP and Dell took its toll, we were pleasantly surprised by the server retailer's upbeat guidance.
To wit, Super Micro Computer expects to earn between $26 billion and $30 billion in revenue in its fiscal year 2025. For context, this is about the same revenue that NVIDIA earned in 2022.
Of course, on the flip side, analysts have taken a dim view of SMCI's persistent cash burn for the third consecutive quarter, amounting to around $635 million. Not even a 10-to-1 stock split - effective from the 01st of October - could manage to overcome investor concern around Super Micro Computer's plunging gross margin and negative free cash flow.
Yet, the fact remains that SMCI's revenue is growing at a breakneck pace. Consider the fact that Super Micro Computer earned $14.94 billion in revenue during its FY 2024, and is all set to double this key metric in FY 2025.
The global server market is expected to earn a total revenue of $133.30 billion in 2025. Assuming SMCI is able to realize its rosy revenue projection, the firm will have increased its market share from 12.7 percent in 2024 to ~22 percent in 2025 (at the high-end of SMCI's guidance and ignoring the slight mismatch between Super Micro's financial year and the calendar year).
The key question remains: will investors ignore Super Micro Computer's fragilities to try to capture a piece of this unbridled growth? Let us know your thoughts in the comments section below.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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