00:00:00
smci hitting record highs maybe we
00:00:02
should change the name to Super macro I
00:00:03
mean because the stock is not micro
00:00:05
anymore super micro computer you're
00:00:07
looking at shares surging ahead of the
00:00:08
open up nearly 10% up a whopping
00:00:11
36% huge rally up more than 600% over
00:00:15
the past 12 months super micro is
00:00:16
clearly the big winner the company
00:00:18
forecasting stronger than expected sales
00:00:20
some of the biggest customers of this
00:00:22
company are Nvidia Intel and AMD
00:00:26
something crazy is happening at Super
00:00:27
Micro computer and smci stock has more
00:00:30
than tripled in the last month alone and
00:00:32
whenever I see that kind of growth
00:00:34
there's really only one question left to
00:00:36
ask is this the top for super micro
00:00:39
stock or are their best days still to
00:00:41
come your time is valuable so let's get
00:00:43
right into it first things first I'm not
00:00:45
here to waste your time here's
00:00:47
everything I'm going to talk about
00:00:49
upfront what super micro computer does
00:00:51
exactly what I see as their two biggest
00:00:53
competitive advantages I'll cover their
00:00:56
latest earnings call and what caused
00:00:57
their stock to triple and of course
00:00:59
whether I think smci stock is still a
00:01:01
good investment as a result I should
00:01:04
also mention that I only buy stocks when
00:01:05
they drop below my price targets
00:01:08
research tells me what to buy but price
00:01:10
targets tell me when so if you want to
00:01:12
see those I'll leave a survey Link in
00:01:14
the description it only takes about 20
00:01:16
seconds and your responses help me
00:01:18
provide the most value all right let's
00:01:20
dive into Super Micro computer although
00:01:22
they might seem like an overnight
00:01:24
success smci is not a new company super
00:01:27
micro was founded in Silicon Valley in
00:01:29
19 1993 the same year as Nvidia in fact
00:01:33
smci and nvidia's San Jose headquarters
00:01:36
are only about 6 M apart that's not a
00:01:39
coincidence and I'll explain why in a
00:01:41
little bit super micro was founded by a
00:01:43
Taiwanese electrical engineer named
00:01:45
Charles leang who is still the company's
00:01:47
CEO today and its second biggest
00:01:50
shareholder right behind Black Rock smci
00:01:53
started out making motherboards and
00:01:54
Computing subsystems that other
00:01:56
companies would buy to build their own
00:01:58
servers Charles langang realiz realized
00:02:00
pretty early on that super micro
00:02:01
shouldn't just build components they
00:02:03
should build the whole system and by the
00:02:06
late 1990s smci was focused on designing
00:02:09
integrating optimizing testing shipping
00:02:13
and even installing preconfigured
00:02:15
end-to-end data center solutions for
00:02:17
their customers today super micro offers
00:02:19
everything from fullscale server and
00:02:21
storage systems down to individual
00:02:23
workstations and networking devices for
00:02:26
a wide variety of markets like cloud
00:02:28
services and Enterprise data centers to
00:02:30
AI training and deep learning and even
00:02:32
5G and Edge Computing and almost all of
00:02:35
their products are ready to go out of
00:02:37
the box companies just plug in the power
00:02:39
cables and the data cables and they're
00:02:41
up and running that's a fine business
00:02:43
model but here's where things get really
00:02:45
interesting instead of competing with
00:02:47
companies like Nvidia AMD and Intel
00:02:50
Charles leang decided to partner with
00:02:52
them so smci isn't really the next
00:02:55
Nvidia like everyone is saying they're
00:02:57
more like the next Taiwan semiconductor
00:03:00
but for a different part of the data
00:03:01
center supply chain while tsmc makes and
00:03:04
packages Advanced chips for other
00:03:06
companies smci integrates those chips
00:03:08
into tailormade Data Center Solutions
00:03:11
adding the right Power Electronics
00:03:13
Cooling and high-speed networking
00:03:14
Solutions and even the right firmware
00:03:16
and software depending on the
00:03:18
application and here's a quick spoiler
00:03:20
for you smci server and storage systems
00:03:22
account for 94% of their revenue with
00:03:25
subsystems and accessories making up the
00:03:27
other 6% and super micros revenues are
00:03:30
up by a whopping 73% quarter over
00:03:33
quarter and 103% year over-year which is
00:03:36
right up there with the kind of growth
00:03:38
that Nvidia reported in their most
00:03:40
recent quarter I've been buying Nvidia
00:03:42
stock since it was well below $200 per
00:03:44
share and 400 and 600 but Nvidia is not
00:03:48
the only company growing fast in this
00:03:50
massive AI boom Lambda Labs provides
00:03:53
other companies with infrastructure for
00:03:55
deep learning everything from clusters
00:03:57
of nvidia's h200 gpus and great Hopper
00:04:00
Super Chips to On Demand Cloud Computing
00:04:02
Services for AI training and they work
00:04:04
with some of the biggest Enterprises in
00:04:06
the world like Microsoft Google Amazon
00:04:10
and even the Department of Defense but
00:04:12
Lambda Labs is still a private company
00:04:14
so we can't just buy their shares on the
00:04:16
stock market that's where link to comes
00:04:18
in link to is a platform that makes
00:04:20
investing in pre-ipo companies easy and
00:04:23
affordable they always show you what the
00:04:25
company does its Market opportunities
00:04:27
and of course how valuations are
00:04:29
changing over time for example Lambda
00:04:32
labs's valuation went up by 9x last year
00:04:35
alone and right now the minimum
00:04:37
investment through link 2 is just over
00:04:40
$2,500 no wonder they already have over
00:04:42
600,000 investors on their platform and
00:04:45
right now link 2 is giving my audience
00:04:47
$500 off your first private investment
00:04:50
when you use my code TS
00:04:53
y500 but this offer ends soon so start
00:04:55
building your private Equity portfolio
00:04:57
by using my link in the description
00:04:59
below today all right in my opinion
00:05:02
super micro Solutions have two big
00:05:04
competitive advantages the first is that
00:05:06
they're headquartered in Silicon Valley
00:05:08
like I said earlier that's not a
00:05:10
coincidence While most original design
00:05:12
manufacturers like foxcon are based in
00:05:15
Taiwan or China Charles leang had the
00:05:17
foresight to realize that the best way
00:05:19
to meet the Computing needs of other
00:05:21
Silicon Valley companies is to work
00:05:24
right next to them that way by the time
00:05:26
one of their Partners comes out with a
00:05:27
new chip super micros solutions for that
00:05:30
chip are almost ready as well for
00:05:32
example as Nvidia designs a new data
00:05:34
center chip like say the Grace Hopper
00:05:36
super chip those designs can be shared
00:05:39
with super micro so that they can start
00:05:41
designing and optimizing the boards the
00:05:43
connectors the cooling and the other
00:05:45
components needed to keep the super chip
00:05:48
at Peak Performance in an actual server
00:05:50
rack and since they're right down the
00:05:52
street updates and changes are easy to
00:05:54
manage as well but Google headquarters
00:05:56
is only 15 M away from Super Micro so
00:06:00
they can work together with them to make
00:06:01
sure that nvidia's chips or amds or
00:06:04
intels are optimized for the right
00:06:06
workloads and the right data centers
00:06:08
that they'll actually end up in as fast
00:06:10
as possible in fact Charles leang set up
00:06:13
every single part of Super Micro to
00:06:15
focus on this one metric of success how
00:06:18
fast can smc's customers get the best
00:06:21
Computing Solutions up and running
00:06:24
that's because lowering the time to
00:06:25
Market means their customers can start
00:06:27
earning Returns on their infrastructure
00:06:29
Investments faster especially if they're
00:06:32
getting the best chips up and running
00:06:33
before their competitors and this is
00:06:36
where super micro's other big
00:06:37
competitive Advantage comes in from day
00:06:40
one their server Solutions have been
00:06:42
completely modular super micro calls
00:06:44
their modules server building blocks
00:06:46
some servers are air cooled While others
00:06:49
require water cooling some customers
00:06:51
might need more memory While others want
00:06:53
more storage and of course some data
00:06:56
centers want more CPUs While others are
00:06:58
buying up as many Jeep gpus as they can
00:07:00
super micro also has server building
00:07:02
blocks for basic Power Cooling
00:07:05
interconnects and networking that can
00:07:07
each be optimized for different markets
00:07:09
or for specific workloads this building
00:07:12
block architecture is what lets smci
00:07:14
move so fast in so many different
00:07:16
verticals when a company like Nvidia
00:07:18
launches a new chip super micro doesn't
00:07:21
need to design a whole new server system
00:07:23
for it they just need to design a new
00:07:25
building block that already connects to
00:07:27
the rest of their ecosystem and of
00:07:29
course as this ecosystem keeps growing
00:07:32
it makes more sense for more data
00:07:33
centers to support it smci has building
00:07:36
blocks for nvidia's Hopper gpus amd's
00:07:39
epic chips Intel Sapphire Rapids and
00:07:41
many more that means super micro can
00:07:44
design build test optimize and deliver
00:07:47
server solutions to customers in weeks
00:07:50
instead of months and for much cheaper
00:07:52
than their competitors which again means
00:07:54
a quicker time to Market Charles hang's
00:07:57
ultimate metric for success while these
00:08:00
are clearly big competitive advantages
00:08:02
today they come with some big keyman
00:08:04
risks although super micro is
00:08:06
headquartered in Silicon Valley their
00:08:08
primary manufacturer is a company called
00:08:11
aom technology aom is located in Taiwan
00:08:14
and it's CEO is Steve leang Charles
00:08:17
liang's brother in fact super micro is
00:08:20
very dependent on Charles leang overall
00:08:22
not just because of his experience
00:08:24
designing the server building BL
00:08:25
architecture or leading the company but
00:08:28
also because of these Family Ties to
00:08:30
their primary manufacturer and the Deep
00:08:32
Partnerships that he's built with chip
00:08:33
companies cloud service providers
00:08:35
semiconductor suppliers and other
00:08:37
customers over the last 30 years that's
00:08:40
a lot of personal networking to
00:08:42
eventually take over from Charles who's
00:08:44
already in his late 60s and while
00:08:46
there's no doubt that he's built an
00:08:48
absolute monster of a hardware company
00:08:50
that's not enough to decide if smci is a
00:08:53
good investment especially at these
00:08:55
prices to do that let's take a look at
00:08:57
their earnings next a a couple of weeks
00:08:59
ago super micro computer reported
00:09:01
earnings for their quarter 2 of 2024
00:09:04
since their fiscal year starts in June
00:09:06
they had record revenues of $33.66
00:09:09
billion for the quarter which is up a
00:09:11
massive 73% quarter over quarter and a
00:09:15
103% year-over-year that's because
00:09:18
they're seeing record demand for AI
00:09:20
systems specifically including modules
00:09:22
for nvidia's a100 and h100 gpus Intel's
00:09:26
gudy 2 accelerators and amd's mi200 and
00:09:29
Mi 250 systems and I expect that demand
00:09:33
to continue with their next generation
00:09:34
of modules for nvidia's upcoming h200
00:09:37
and B100 Blackwell chips their Grace
00:09:40
Hopper Super Chips as well as the next
00:09:42
generation of amd's instinct and Intel's
00:09:44
gudd platforms there are a few things in
00:09:47
smc's latest earnings report that really
00:09:49
stick out to me as an investor first
00:09:52
they're hyperfocused on expansion just
00:09:54
like Nvidia super micro's biggest
00:09:56
problem right now is keeping up with
00:09:58
demand they were shipping about 300
00:10:00
racks per month in 2021 but in 2022 they
00:10:04
almost 10x their capacity to ship over
00:10:07
2,000 racks per month now that number
00:10:10
doubled again and super micro has
00:10:12
ongoing expansions in California as well
00:10:14
as Taiwan for manufacturing so I expect
00:10:17
their production capacity to keep
00:10:19
growing fast besides capacity they're
00:10:22
also expanding the types of solutions
00:10:24
they provide like I said earlier smci
00:10:26
started out by making different
00:10:28
subsystems and and components for
00:10:30
servers before making the switch to
00:10:32
selling complete systems themselves
00:10:34
today those systems make up around half
00:10:36
of their revenue but they're also seeing
00:10:38
a lot of Revenue growth for their total
00:10:40
IT solutions which include optimized
00:10:42
software firmware and ongoing Services
00:10:45
the second thing they're focused on is
00:10:47
capturing market share because the
00:10:49
markets they operate in are all growing
00:10:51
fast right now they break their revenue
00:10:53
into three different verticals 5G and
00:10:55
Edge Computing large data centers and
00:10:58
Enterprise data centers which is where
00:11:00
all the cloud computing and generative
00:11:02
AI training happen today the global
00:11:04
cloud computing Market is expected to
00:11:07
almost 4X in size over the next decade
00:11:09
which is a compound annual growth rate
00:11:11
of around 177% the global Edge Computing
00:11:14
Market is expected to grow even faster
00:11:17
about 4.5x over the next decade which is
00:11:20
a compound annual growth rate of over
00:11:22
18% and of course the global artificial
00:11:25
intelligence Market is the hottest
00:11:27
Market on the planet it's expected to
00:11:29
more than 15x in size over the next 10
00:11:32
years which is a staggering 37% growth
00:11:35
rate so smci is going to benefit big
00:11:37
time from providing the Computing
00:11:39
infrastructure for all of these markets
00:11:42
even if they just keep their market
00:11:43
share the same let alone if they keep
00:11:46
expanding faster than their competition
00:11:48
that's why their gross margins are
00:11:50
declining they're aggressively pricing
00:11:52
their products to get into as many data
00:11:54
centers as possible this is a very smart
00:11:57
move for the long term because remember
00:12:00
super micro has that unique building
00:12:01
block ecosystem with all kinds of
00:12:04
different plug-and-play modules that
00:12:06
makes their Solutions very sticky not
00:12:08
just because it's faster and cheaper to
00:12:10
get them up and running but they're also
00:12:12
easier to upgrade and maintain over time
00:12:15
if data centers want to keep those
00:12:17
advantages as companies like Nvidia AMD
00:12:20
and Intel come out with new Chips
00:12:22
they'll need to stay with super micro to
00:12:24
make it happen but even though their
00:12:26
gross margins are declining their
00:12:28
operating margin are staying steady and
00:12:30
even increasing a bit since their
00:12:32
revenues are growing so much faster than
00:12:34
their costs so to me super micros growth
00:12:37
actually looks very healthy overall
00:12:39
they're not just burning money to
00:12:40
acquire new customers at any cost
00:12:43
they're expanding their production
00:12:44
capacity their number of products and
00:12:46
the markets that they operate in
00:12:48
aggressively but intelligently because
00:12:50
they know they have a unique data center
00:12:52
solution that drives down time to Market
00:12:55
and the total cost of ownership for
00:12:56
their customers no wonder they crushed
00:12:58
their Revenue guidance of $2.8 billion
00:13:00
for the quarter by over 30% they're
00:13:04
guiding for $3.9 billion next quarter
00:13:06
which would be around a 205% increase
00:13:09
year-over-year like I've been saying in
00:13:12
every video the key to finding great
00:13:14
stocks is understanding a company's
00:13:16
products not just their profits massive
00:13:19
growth happens when a company has the
00:13:21
perfect product for a new or quickly
00:13:23
growing Market that's exactly what we're
00:13:25
seeing with smci and that's exactly why
00:13:28
the stock is basic Bally tripled year to
00:13:30
date even after a 20% draw down at the
00:13:33
time of this recording all right I
00:13:35
talked about what super micro computer
00:13:37
does their big competitive advantages
00:13:39
their earnings and why their stock took
00:13:42
off like a rocket now with all that
00:13:44
context let's talk about whether I would
00:13:46
buy smci stock at these prices and if
00:13:49
you feel I've earned it consider hitting
00:13:50
the like button and subscribing to the
00:13:52
channel that really helps me out and it
00:13:54
lets me know to put out more deep Dives
00:13:56
like this thanks and with that out of
00:13:58
the way let's talk about the right price
00:14:00
for smci stock super micro is a great
00:14:03
way to gain exposure to the data center
00:14:05
Hardware market during this AI boom
00:14:07
every time Nvidia AMD or Intel come out
00:14:10
with a new chip super micro designs and
00:14:12
manufactures a new set of modules to add
00:14:15
to their growing ecosystem of server
00:14:17
building blocks so they're benefiting a
00:14:19
bit from the hardware Network effect
00:14:21
economies of scale and of course all the
00:14:23
Tailwinds associated in operating in
00:14:26
some of the fastest growing markets on
00:14:28
the planet kind of like Taiwan
00:14:30
semiconductor but in a different part of
00:14:32
the data center supply chain on top of
00:14:34
that the revenues are growing much
00:14:36
faster than their costs and their
00:14:38
forward price earnings ratio is only
00:14:40
around 36 given how fast their earnings
00:14:42
are growing I'd expect this ratio to
00:14:45
keep shrinking over time even if the
00:14:47
stock price continues to Skyrocket so
00:14:50
for all those reasons I don't think it's
00:14:52
too late to buy smci stock I would
00:14:54
average in over time especially if we
00:14:57
see more days where the stock drops by
00:14:59
20% or more I've been holding Nvidia
00:15:01
stock since 2016 and I know I'd
00:15:04
seriously regret it if I stopped
00:15:05
building my position after the stock had
00:15:07
tripled I think the same will be true
00:15:10
for super micro computer over the long
00:15:12
term and this is why it's so important
00:15:14
to understand the science behind the
00:15:16
stocks thanks for watching and until
00:15:18
next time this is ticker symbol U my
00:15:21
name is Alex reminding you that the best
00:15:24
investment you can make is in
00:15:27
you
