Super Micro shares rise as optimistic earnings forecast signals strong demand for artificial intelligence

Reuters Oct 21 - Super Micro Computer SMCI.O saw its shares jump by almost 13% on Wednesday, after the company forecasted quarterly revenue (link) and profit margin would far exceed Wall Street expectations, indicating that demand for AI data centers remains robust.

The AI server maker’s shares rose 12.7% in premarket trading to $36.69.

Details are as follows:

• According to data compiled by London Stock Exchange Group (LSEG), Super Micro Computer projects first-quarter revenue between $18.5 billion and $19.5 billion, above analysts’ expectations of $15.23 billion

• The company now expects profit margins to be between 12% and 12.5%, up from 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

• Spending by Microsoft, Google, Amazon, and Meta on AI infrastructure is expected to exceed $70 billion this year

• Other server manufacturers Dell (Dell DELL.N) and Hewlett Packard Enterprise HPE.N also saw their shares increase by more than 4% in premarket trading

• Strategists at UBS Global Wealth Management stated: “Investors may focus on whether the strong performance of core businesses can continue to support high levels of investment in artificial intelligence.”

• The brokerage added that the market will closely scrutinize comments from AI giants regarding expenditure, profit margins, and returns to determine if the AI capital expenditure cycle is justified

• Recently, the market has expressed concern about the profitability of data center operators who are raising funds for expansion projects through bond issuances while borrowing costs are rising

• Heavily indebted data center operator CoreWeave (CRWV.O) became the focus of a sell-off last week (link), and the sell-off also affected AI-related stocks

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