On August 27, AI server giant Supermicro was accused of accounting violations, inadequate disclosure of related party transactions, and evading sanctions by selling products to Russia by short-seller Hindenburg Research.

In addition, Supermicro announced on August 28 that it would delay the release of its annual report, potentially facing order withdrawals. Industry sources also believe this news presents a chance for Supermicro’s competitor Dell to gain market share.

Besides Dell, a report from Commercial Times also points out that Hewlett Packard Enterprise (HPE) could benefit from the shift in orders, potentially boosting shipments for its Taiwanese supply chain partners such as Wistron, Inventec, Quanta, and Foxconn.

The report from Commercial Times also cite sources, suggesting that this shift could provide Gigabyte, which is actively promoting its liquid-cooled products for NVIDIA’s H200 series, with  opportunities in the second half of the year.

Wistron, as a key supplier of motherboard and GPU accelerator cards for NVIDIA’s Hopper and Blackwell GPU, is not only a major supplier for Supermicro’s server motherboards but also for Dell. Its clients include HPE and Lenovo as well, which makes the company one of the primary beneficiaries.

Similarly, Inventec, one of the server motherboard suppliers, is also expected to benefit if the shift in orders boosts Dell, HPE, and Lenovo.

Moreover, one of Supermicro’s largest clients, CoreWeave, is transitioning to become a cloud computing service provider specializing in GPU-accelerated computing.

This shift has increased demand for GPU-accelerated computing and liquid cooling solutions. Reportedly, it’s believed that Gigabyte, which holds orders from CoreWeave, could be one of the biggest beneficiaries of the upcoming order shift.

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• [News] Supermicro Faces Order Withdrawal Crisis, Potentially Benefiting Dell
• [News] Quick Couplings’ Buying Surge Reportedly Leads to AI Server Component Shortage Brought up by Supermicro

(Photo credit: Supermicro)

Supermicro Computer has reportedly been targeted by short-sellers and questioned over alleged accounting manipulations, leading to a delay in filing its 2024 10-K annual report and causing market unease.

On August 27, Hindenburg Research, a short-selling company known for targeting major entities like India’s Adani, Nikola, Lordstown, and fintech giant Block, released a report accusing Supermicro of accounting violations, inadequate disclosure of related party transactions, and evading sanctions by selling products to Russia.

At the moment following the release of Hindenburg’s report, Supermicro also announced a delay in submitting its 2024 fiscal year 10-K annual report, citing the need for more time to assess the design of internal controls and operational effectiveness. This move has further heightened market concerns about Supermicro.

Moreover, Hindenburg also raised concerns about the quality of Supermicro’s products and services, suggesting that competitors like Dell might capitalize on Supermicro’s lost orders.

According to a report from Barron’s citing Evercore ISI analyst Amit Daryanani’s report, it’s highlighted that Supermicro is facing a risk of customer order withdrawals.

Supermicro, on the other hand, didn’t immediately respond to a request for comment about the delay in filing the annual report.

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• [News] Quick Couplings’ Buying Surge Reportedly Leads to AI Server Component Shortage Brought up by Supermicro
• [News] Supermicro’s Financial Results Reveal Profit Shortfall

(Photo credit: Supermicro)

AI server solution provider Supermicro, at its earnings call last week, revealed that the liquid cooling industry has been facing shortages for critical components, which further hinders its shipments. According to the latest report by the Economic Daily News, sources from the supply chain indicate that the critical component Supermicro referred to is the “quick coupling.”

The report notes that Taiwanese companies, including Global Tek, Fositek and Lotes, are accelerating their pace on sample verification.

Thanks to the soaring demand, the market is seeing a frenzy for quick couplings, with buyers willing to pay premium prices to secure capacity, the report suggests. The report notes that the price of quick couplings has surged from the original USD 40 to USD 60 per unit, with eager buyers claiming to pay for more as long as the components are available.

Citing industry experts, the report explains that the liquid-cooling system in AI servers consists of six key components: cooling distribution units (CDUs), cold plates, cabinets, fan walls, coolant distribution manifolds (CDMs), and quick couplings.

Among these, quick couplings are responsible for connecting the coolant flow between the cold plate and the CDU with great speed. In addition, as they are also prone to leakage, their quality would be especially crucial for liquid-cooling systems to operate smoothly.

The reason for the shortage, the report notes, is primarily due to the fact that a single AI server cabinet requires hundreds of male and female threads for quick couplings. As major cloud service providers (CSPs) are purchasing AI servers in large quantities, the demand for quick couplings has surged drastically, even to hundreds of times of the cabinets themselves.

It is worth noting that currently, the market for liquid-cooling quick couplings in AI servers is dominated by seven companies, including two Chinese firms. However, as the sanctions implemented in the U.S.-China tech war restrict the momentum of the Chinese companies, the market demand could not be satisfy. Also, the patents related to the components have created high barriers for other suppliers to enter the market.

Taiwanese companies, including Global Tek, Fositek and Lotes, therefore, are actively investing in the business and accelerating their sample submission, eyeing for the opportunities to receive order transfers.

Global Tek, for example, is working with partners at its Wuxi plant in China and its Taoyuan plant in Taiwan, with samples being tested. The company anticipates revenue contribution as early as the fourth quarter of this year or early next year.

Fositek, supported by its parent company Asia Vital Components, is currently focused on developing quick couplings and has already submitted samples for customer certification. Lotes, on the other hand, expects to see progress by the end of the third quarter.

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• [News] Supermicro’s Financial Results Reveal Profit Shortfall
• [News] Supermicro President Charles Liang Bullish on Direct Liquid Cooling, Targeting a 15% Market Share within Next Year 

(Photo credit: Supermicro)

Super Micro Computer, Inc. (Supermicro), a provider of servers and storage solutions, released its financial results for the fourth quarter of the fiscal year 2024 (ending June 30, 2024) on August 6. The revenue increased by 143.6% year-over-year (37.9% quarter-over-quarter) to USD 5.31 billion. The Non-GAAP diluted earnings per share (EPS) rose by 78.1% year-over-year (decreased by 6% quarter-over-quarter) to $6.25.

Supermicro forecasts that for the first quarter of the fiscal year 2025 (ending September 30, 2024), revenue will be between USD 6 billion and 7 billion (midpoint of USD 6.5 billion), and the Non-GAAP diluted EPS is expected to be between $6.69 and $8.27 (midpoint of $7.48).

Additionally, for the fiscal year 2025 (ending June 30, 2025), revenue is projected to be between USD 26 billion and 30 billion (midpoint of USD 28 billion). A report from MoneyDJ further cite sources, indicating that Supermicro’s fiscal year 2025 revenue is expected to reach USD 23.4 billion.

According to the Q4 financial report for the fiscal year 2024 released by Supermicro, the gross margin decreased from 17.0% in the same period last year to 11.2%, the lowest since the company started reporting quarterly results in May 2007 , and below the 15.5% reported in the third quarter of the fiscal year 2024.

Per wccftech’s report, the Super Micro earnings call marked the first opportunity to engage with a company integrated into NVIDIA’s AI ecosystem. Consequently, the company’s management faced numerous questions about potential GPU delays impacting its financial performance.

In response, Charles Liang, Supermicro’s Chief Executive Officer and Chairman of the Board, acknowledged that his company had heard about potential delays from NVIDIA.

However, he emphasized that Supermicro considers such delays as a normal possibility, noting that technology companies often experience slight advancements or postponements in their schedules.

In this instance, it seemed to Liang that NVIDIA had pushed out its timeline slightly, which he stated would not impact Supermicro’s ability to offer its customers new solutions like the H200 cooling system, given their extensive customer base. He concluded by saying that the overall impact of this delay on Supermicro should be minimal.

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• [News] Foxconn Remains Unfazed Despite NVIDIA’s GB200 Delay, with Customers Aim to Secure Their Orders
• [News] Supermicro President Charles Liang Bullish on Direct Liquid Cooling, Targeting a 15% Market Share within Next Year

(Photo credit: Supermicro)

The heightened tensions between China and the U.S. are expected to escalate further. According to a report from Commercial Times, this has been reflected in the past quarter’s increased demand for AI servers among Chinese Cloud Service Providers (CSPs) and enterprises.

Following NVIDIA’s recent rush orders, Taiwanese server manufacturers such as Inventec, Wistron, and Foxconn are also experiencing increased demand for H20-related orders from Chinese customers. Reportedly, these orders are expected to ramp up in the third and fourth quarters.

Industry sources cited by the same report further indicate that NVIDIA’s recent rush order, with a scale of 100,000 H20 units, is expected to be fulfilled by mid-fourth quarter. While Wistron, a major substrate supplier, started to ramp up shipments from late second quarter.

Inventec, which benefited from strong H20 demand from Chinese customers in the first half of the year, is said to be seeing a shift in AI server shipments to predominantly U.S. customers in the second half. However, the demand from Chinese customers has not disappeared and is expected to continue providing momentum for Inventec’s performance.

SuperMicro, which is reportedly expanding its server sales business in the Chinese market through the channel resources of Taiwanese graphics card manufacturer Leadtek, is also expected to bring positive benefits to Leadtek’s sales operations in China and Northeast Asia. Additionally, with the recovery of its own AI workstation business and the expected demand for H20 from Chinese customers, Leadtek is likely to become one of the major beneficiaries of the surge in orders from Chinese clients in the second half of the year.

On the other hand, due to the impact of U.S. chip restrictions, it’s hinted that some Chinese customers are increasingly leasing high-end AI computing power services from global companies to meet the current AI model training needs.

This trend is indirectly boosting the order pull for high-end AI server products from Tier 2 and Tier 3 data center operators in Europe and the Asia-Pacific region, simultaneously providing shipment momentum for related Taiwanese manufacturers.

According to sources cited by Commercial Times, the demand for H20 orders from Chinese customers has been quite unstable this year, with sudden spikes of urgent orders.

However, as the confrontation between China and the U.S. might intensify due to the upcoming U.S. presidential election, Chinese companies may be prompted to increase their demand for H20 in the coming quarters. This could significantly boost the AI server business for related Taiwanese manufacturers in the second half of the year.

Regarding the need for H20, TrendForce previously mentioned that Chinese companies would continue to buy existing AI chips in the short term. NVIDIA’s GPU AI accelerator chips remain a top priority—including H20, L20, and L2—designed specifically for the Chinese market following the ban.

Read more

• [News] NVIDIA Reportedly Facing Price Cut Pressure of H20 Chip in China Amid Competition with Huawei
• [News] NVIDIA’s China-Exclusive H20 to Begin Pre-sales Next Month

(Photo credit: NVIDIA)