In a surprising turn of events, Wedbush analyst Matt Bryson has made a significant update to his bearish outlook on Super Micro Computer Inc. In a recent report, Bryson admitted to missing a "fundamental shift" in the company's latest quarter that has laid the groundwork for a promising full-year forecast.
Bryson has upgraded the stock from underperform to neutral and highlighted the increased investment in generative AI training that occurred between March and June. This investment has proven to be highly beneficial for Super Micro, allowing them to thrive in the current market.
Despite concerns about a potential decline in business during the current quarter, Bryson reassures investors by stating that this outlook aligns with their previous conversations about GPU tightness affecting AI server shipments. Super Micro's growth expectations for fiscal year 2024 are strongly influenced by component availability rather than a decrease in demand.
As Nvidia Corp. prepares to release its earnings report after Wednesday's closing bell, Bryson believes that the results will serve as a positive indicator for Super Micro, regardless of whether the commentary is exceptional or mediocre.
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Alongside this fascinating development, it's important to note the growing threat faced by SoftBank's Arm as it gears up to go public. The rapidly expanding AI market poses challenges and opportunities for Arm, and they must navigate these waters wisely.
With earnings results from Nvidia on the horizon, we eagerly await insight into the AI windfall and the impact it may have on various players in the industry.
AI-Chip Demand Could Impact Super Micro's Outlook
If Nvidia provides a positive outlook on the demand for AI chips, it could have implications for Super Micro's own forecast for the third quarter, suggests Bryson. Conversely, a more conservative forecast from Nvidia could still be received positively by Super Micro. This is because "continued constraints would support AI server pricing and gross margin metrics."
On its recent earnings call, Super Micro acknowledged supply constraints related to Nvidia chips.
Bryson now believes that there is less likelihood of Super Micro experiencing a downside event in the next few quarters.
Looking ahead, while there is still a possibility that Super Micro may face structural market issues such as average selling price and margin compression for AI servers once NVDA GPU availability improves, Bryson sees limited likelihood of this result playing out until well into 2024.
Super Micro shares have experienced significant growth this year, more than tripling in value. In Wednesday's premarket trading, they were up nearly 1%.