Updated: 1-Super Micro shares rise as upbeat forecast signals strong demand for artificial intelligence
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Reuters October 21 - Super Micro Computer (SMCI.O) shares soared over 12% on Wednesday after the company forecasted quarterly revenue (link) and profit margin would far exceed Wall Street estimates, indicating that demand for artificial intelligence data centers remains strong.
The AI server maker's stock rose 12.2% in pre-market trading to $36.44.
Details are as follows:
According to data compiled by London Stock Exchange Group (LSEG), Super Micro expects first quarter revenue to be between $18.5 billion and $19.5 billion, higher than analysts' expectations of $15.23 billion
The company now expects profit margins to be between 12% and 12.5% , compared to the previous forecast of 10.4% to 10.8%
The current boom in data center construction has largely benefited semiconductor and AI server manufacturers, including Super Micro
Microsoft, Google, Amazon, and Meta are expected to spend more than $700 billion on AI infrastructure this year
Other server makers Dell (DELL.N) and Hewlett Packard Enterprise (HPE.N) were also up 5.2% and 4% in pre-market trading, respectively
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Strategists from UBS Global Wealth Management stated: “Investors may focus on whether the strong performance of the core business can continue to support high levels of AI investment.”
The brokerage further added that the market will closely scrutinize comments from AI giants regarding spending, profit margins, and returns to determine whether the AI capital expenditure cycle is justified.
Recently, the market has expressed concerns about the profitability of data center operators, who are now raising funds for expansion projects by issuing bonds, even as borrowing costs rise
Heavily indebted data center operator CoreWeave (CRWV.O) became the focus of a sell-off last week (link), which also affected AI-related stocks
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