On October 7, 2024, Eastern time, Supermicro Computer announced that its liquid cooling solution shipments exceeded the 100,000 Barrier, which quickly caused a sensation in the AI chip market, and the stock price soared, rising nearly 17.6% intraday at one point, and finally closed up about 15.8% at $47.74, a new high in several months. This event not only highlights the success of Supermicro Computer in technological innovation and market layout, but also ushers in a new inflection point in the AI chip market.
1. The rise of ultra-microcomputer liquid cooling solutions
The liquid cooling solution shipped by Supermicro Computer is a complete cooling solution, including a powerful coolant distribution unit (CDU), cold plate, coolant distribution manifold (CDM), cooling tower and end-to-end management software. Designed to meet the escalating cooling needs of data centers, the solution significantly reduces the cost of data center hardware and the cost of continuously running cooling infrastructure through efficient liquid cooling technology.
Since June of this year, Supermicro has delivered more than 2,000 liquid-cooled racks, and more than 100,000 GPUs with the solution have been shipped in a single quarter, highlighting the strong customer demand for AI servers. In the announcement, Supermicro Computer made it clear that liquid cooling is a more efficient option to maintain the required operating temperatures for each GPU and CPU, as the power required for AI and high-performance computing (HPC) workloads is close to 12kW per server. A single AI rack now generates more than 100kW of heat, which needs to be effectively removed from the data center. Liquid cooling at data center scale can significantly reduce power requirements for a given cluster size and reduce power consumption by up to 40%, enabling users to deploy more AI servers in a fixed power range, increasing computing power and reducing training time for large language models (LLMs).
Figure: Quarterly shipments of ultra-micro computer liquid cooling solutions exceeded 100,000: a new inflection point for the AI chip market?
2. A new inflection point in the AI chip market
The surge in shipments of ultra-micro computer liquid cooling solutions not only brings new vitality to the AI chip market, but also may trigger profound changes in the market. Judging from the data, if the average price of such GPUs is comparable to that of Nvidia's $30,000 chip per unit, then the order size of supermicro computers may reach billions of dollars. Analyst Woo Jin Ho further pointed out that assuming that 1,500 of the 2,000 liquid-cooled racks that Supermicro said were shipped in September, at a price of about $3 million each, the September sales would be about $4.5 billion. This data provides a good basis for Supermicro's sales to reach the median guidance range of $6.5 billion in the first quarter of fiscal 2025 ending at the end of September 2024.
The wide application of liquid cooling technology not only reduces the energy consumption and O&M costs of data centers, but also improves the computing power and training efficiency of AI servers. This is undoubtedly a huge boon for large cloud service providers (CSPs) and AI factories. They can deploy more AI servers in a fixed power range, increasing computing power and reducing the training time of large language models. This change will not only promote the rapid development of AI technology, but also reshape the competitive landscape of the AI chip market.
3. Challenges and opportunities for ultra-microcomputers
Although Supermicro Computer has achieved remarkable results in the liquid cooling solution and AI server market, it does not mean that it has peace of mind. In fact, supermicrocomputers are still facing both market and financial pressures.
On the one hand, investors are concerned about the decline in supermicrocomputer's profit margins and financial data. This concern peaked especially after Supermicro announced on August 28 that it would delay the filing of its 10-K filing with the United States Securities and Exchange Commission. Hindenburg Research, a well-known short-seller firm, subsequently issued a short-selling report, alleging that Supermicro had a bad record in accounting and was involved in undisclosed related-party transactions. The United States Department of Justice's investigation has cast a shadow over Supermicro's finances.
However, on the other hand, the advantages of ultra-microcomputer in technological innovation and market layout are still obvious. Its strength in rack-level design engineering and short lead times set it apart from the highly competitive market and won key AI deals. At the same time, with the rapid development of AI technology and the continuous growth of market demand, ultra-micro computers are expected to maintain a strong growth momentum in the next few years.
4. The future prospect of supermicrocomputer
In the face of market challenges and opportunities, Supermicro Computer needs to continue to strengthen technological innovation and market layout, and continuously improve its core competitiveness and market position.
First of all, ultra-micro computers need to continue to increase R&D investment in liquid cooling technology and continuously introduce more efficient and energy-saving cooling solutions. This will not only reduce the energy consumption and O&M costs of data centers, but also improve the computing power and training efficiency of AI servers, thereby meeting the market demand for high-performance AI servers.
Second, Supermicro needs to strengthen cooperation with large cloud service providers and AI factories to jointly promote the rapid development and widespread application of AI technology. Through in-depth cooperation, Supermicro can better understand the needs and pain points of customers, so as to provide more customized solutions and services.
Finally, Supermicro needed to increase financial transparency and strengthen financial controls to gain the trust and support of investors and customers. This requires Supercomputer to establish a sound internal control system, strengthen the review and disclosure of financial reports, and ensure the authenticity and accuracy of financial data.
5. Conclusion
The shipment of ultra-micro computer liquid cooling solutions exceeded the 100,000 mark, which not only brought a new dawn to the AI chip market, but also set a new benchmark for the entire industry. In the future development, Supermicro Computer needs to continue to maintain technological innovation and market acumen, and constantly improve its comprehensive strength and market competitiveness. Only in this way can we stand out in the fierce market competition and become a leader in the industry. At the same time, we also expect that Supermicro Computer will make greater contributions to the rapid development and wide application of AI technology in the future.
