Super Micro Computer (SMCI 3.76%) had a turbulent year in 2024. Things have settled down for the artificial intelligence (AI) server maker now, though, and business is picking up. Often referred to as Supermicro, the supplier of high-performance servers for AI data centers, is riding a wave of new data center construction.
That macro tailwind and news this week of an exclusive partnership has the stock surging by 10.4% for the week as of Thursday afternoon, according to data provided by S&P Global Market Intelligence.
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AI capital spending keeps increasing
Quarterly reports from big tech companies Microsoft and Meta Platforms this week confirmed that not only is capital spending for AI compute power continuing, but investments are growing.
Microsoft CEO Satya Nadella commented, "Cloud and AI is the driving force of business transformation across every industry and sector." Supermicro is benefiting from that trend. Microsoft CFO Amy Hood told investors on Microsoft's conference call that while more than half of capital spending in the quarter was for long-lived assets, the balance was "primarily for servers, both CPUs and GPUs, and driven by strong demand signals."
She added that capital spending in the current quarter will rise to a record of over $30 billion, based on strong cloud and AI demand signals. Expand those business conditions across the tech sector, and one can see why investors are buying Supermicro stock. Shares have doubled year to date as the business grows and accounting issues from last year are in the rearview mirror.
This week, Digi Power X, a small AI and digital infrastructure company, announced plans to scale a new platform at its flagship Alabama data center site. The site contains over 10,000 Nvidia GPUs, and the platform was developed exclusively with Supermicro.
That's just one example of the many ongoing data center projects. Supermicro will be a supplier to some of them, and should see its sales continue to expand. Investors are buying into the stock this week as the big tech companies reassure that data center spending is still thriving.
