Super Micro Computer has gone from an obscure server maker to $60B market cap

https://www.wsj.com/tech/ai/super-micro-computer-company-profile-d93a41da

by Bostonian • 2 years ago

181 130 2 years ago

Bostonian2• 2 years ago

'Nvidia’s chips became the workhorses of the boom, making the complex computations necessary to create systems such as OpenAI’s ChatGPT. Server manufacturers who could ship those chips to customers fastest and in the largest quantities had an edge.

Liang said it has been helpful that his base in San Jose, Calif., is just a 15-minute drive from Nvidia’s headquarters in Santa Clara. “Our engineering teams are able to work together from early morning to midnight,” he said.

Supermicro’s recent dominance in the AI boom, industry executives and analysts say, also stems partly from its strategy of making electronic “building blocks” that can be assembled into servers in an almost endless number of configurations. Rivals offer a more limited menu to customers.

That flexibility has been an advantage in the AI boom, analysts say. Developers of self-driving car technology want different server setups than companies making language-generation AI systems such as ChatGPT. Supermicro can deliver customized infrastructure for both.'

drakerossman• 2 years ago

Who's their competition? What's their moat, except for being 15-minutes drive away from Nvidia's HQ?

Bostonian2• 2 years ago

The article says

`Analysts clash on Supermicro’s ability to hold on to its position longer term. Wedbush analyst Matt Bryson said, historically, no company selling servers has had more than 30% market share.

“There’s not a reason Dell can’t do exactly what they’re doing,” Bryson said.

Others aren’t so sure. Some analysts say that established competitors will have a hard time bringing new products to market so quickly and have larger revenue streams from software and services.

Supermicro is trying to gain further market share by doubling down on AI and continuing to ship its servers out quickly. The company is also keeping prices low to entice new customers: Its gross profit margin totaled around 15% in its latest quarter, down from 17% in the previous one. HPE, by comparison, had gross margins of 36% in its latest quarter.`

idontknowifican• 2 years ago

fwiw:

my work is moving from supermicro to dell nodes due to the immaturity of the support (interface and personnel).

lightedman• 2 years ago

“There’s not a reason Dell can’t do exactly what they’re doing,” Bryson said.

I find that quote interesting. As someone that worked for Dell, I can figure out why - they're heavily-invested in the support side of things. They're too busy with that and their current consumer and business-class offerings that realistically the server market segment they're already in doesn't exactly overlap with Super Micro, and most likely never will outside of some buzzword AI marketing.

convolvatron2• 2 years ago

its not really a moat, but its a difficult model to emulate.

what they offer is a set of standard parts, tailored for verticals they think are important. but the secret sauce is that they are willing to customize just that much to make things work the customer.

even if you are a small startup and can't promise more than 100 units/yr, its entirely likely that they will build a custom PCB or riser or chassis on the chance that you will be successful. not a whole design, but a tweak on one of their standard models. they've done that for me before with no NRE, maybe they do charge sometimes.

so their moat is that they have enough money to make those bets, and an engineering organization that can do that in a lightweight enough fashion to make the whole thing work. and they do this while remaining very cost competitive

godzillabrennus• 2 years ago

Given how few people in a “startup” possess the skills to know and articulate their needs and have the network to reach the right people in a company that size, it seems like a reasonable bet to make.

amluto2• 2 years ago

I have a system along these lines lying around. It’s a very low volume Supermicro board, made for a partnership between Intel and a little startup (not mine). The startup might, at their discretion and possibly with an NDA or two, tell you the model number. Then Supermicro would sell you the board.

I have no idea what money, if any, changed hands, other than the fact that I paid, IIRC, about $600 for the board.

throwaway114603• 2 years ago

Their moat is good server hardware that can be ordered without talking to a sales person that has one goal - determine how much they can milk your budget.

1oooqooq• 2 years ago

ironically they could only do that by a lack of investor interest. Let's see how many days this last now.

Gelob• 2 years ago

They used to let you order without talking to sales, now they want to validate the config like Dell and HPE. They are slow and don't respond and their ETAs are terrible and often wrong.

rmah• 2 years ago

Their competition is the enterprise hardware divisions of HP, Dell, and IBM. SuperMicro makes reasonably good quality, lower-cost server equipment. They are, IMO, a pretty good value if you don't want high-end support from the hardware vendor.

0xcde4c3db• 2 years ago

ASRock has also pushed into some of Supermicro's traditional product segments via the "ASRock Rack" brand. I have no idea how big that business is, though.

1letterunixname3• 2 years ago

HPE, Dell, and IBM are glorified CDW-business model salespeople. Megacorps have no use for that when they can engage the source and get their own custom gear.

https://en.wikipedia.org/wiki/Quanta_Computer

oldpersonintx• 2 years ago

Decent products with decent service, no gimmicks and fair pricing is a moat

1letterunixname3• 2 years ago

Quanta and FoxConn. The weird thing though, is the megacorps who can afford to design their own gear in-house are spending money on these outside shops. Waste of money.

fragmede2• 2 years ago

Depends how you see it. Spending resources to do it in house when an outside shop does it could be seen as a waste of money too. if someone else is already doing it, why spend money redoing what they do?

guilhas• 2 years ago

As a home user I like their hardware has the least vendor lock in, so when things break it is easier to replace with generic parts or swap around

rodgerd• 2 years ago

Here's the incumbent experience for proper servers:

1. You're a small company. None of the big companies will talk to you. You're a waste of their time.

2. You're a medium company. Maybe the worst sales person on the team is desperate enough to talk to you.

3. You're a big company. They will be only too happy to talk to you.

You want to buy a rack of servers. They will not sell you a rack of servers. No, no, no.

You need to talk about how their SAN is much better than your current SAN. Also they just bought a virtualisation company so maybe you should replace your virtualisation stack with theirs. And have you considered how helpful their outsourcing service could be for running your datacentre? They'll undercut your current team of staff as long as you commit to replacing all your servers with theirs. Also they hear you're making use of REST services, have you considered one of their REST security appliances? They'll throw them in free.

None of these conversations happen with the person trying to buy a rack of servers, they'll happen with a vice president or procument or your finance team. Your rack of servers comes with a bunch of "free" stuff that you didn't want and don't have time to implement. Eighteen months later you're being told to drop all your work that your customers care about, because whoever inked the deal with the free REST appliances looks stupid if they don't get used, so you have to implement them

Supermicro are just selling you a rack of servers.

protocolture2• 2 years ago

I need high spec hardware in low order quantities.

I need it in a very custom arrangement.

I need it without 10 layers of sales muppets trying to upsell me.

I need it delivered quick.

Supermicro.

Also they seem to do a bunch of off label stuff for other parties. I found one of their boards in the router of a small network hardware provider.

dangle1• 2 years ago

https://archive.ph/FrBaL

rasz• 2 years ago

obscure server maker

First google server racks

https://blog.codinghorror.com/building-a-computer-the-google...

https://en.wikipedia.org/wiki/History_of_Google#Late_1990s

https://commons.wikimedia.org/wiki/Category:Google%27s_first...

were build using Supermicro P6SBM

bawana• 2 years ago

I guess a company just has to move close to nvidia, label one of its products with ‘ai’ and watch its valuations 10x. Foodtruck.ai?

riwsky• 2 years ago

LLM = Large Lunch Menu = $$$

solumunus4• 2 years ago

SMCI is experiencing massive revenue growth, so you also need that. SMCI forward PE isn’t even that crazy yet, TSLA had much higher at its peak.

m3kw9• 2 years ago

I thought this was a meme pump, are these guys actually having some legitimate products or services?

ardaoweo• 2 years ago

Server-grade motherboards that have been widely used for a long time sounds like a legitimate product business. Whether or not they have long-lasting competitive advantage, that is another question.

throwaway114603• 2 years ago

It's the oldest, most successful, cheapest and for many people technologically superior server maker that's not IBM or HPE. Many successful businesses were built on their products in the past 3 decades. Most notably Google.

hakfoo2• 2 years ago

They were always in the list of "you want something that's workstation/server reliable, but you don't want to deal with an OEM who's going to sell you a propriatery case/PSU/motherboard. ISTR Tyan being in the same boat, but you don't hear as much about them anymore.

formerly_proven• 2 years ago

Supermicro has been around since forever and is like one out of one and a half OEMs who actually sell server building blocks on the open market.

Stock market shenanigans are also hardly a new experience for this symbol, either: Already forgot about the discredited 2018 Bloomberg hit piece? https://www.bloomberg.com/news/features/2018-10-04/the-big-h...

rsync• 2 years ago

"...are these guys actually having some legitimate products or services?"

rsync.net is built entirely on supermicro head units and, until a few years ago, their JBODs.

Then they got greedy and tried to do the old "certified drives" bullshit with their JBODs and that was the end of that ... now we use the celestica JBODs we source from IX systems.

Head units are still supermicro, though. Fingers crossed ...

wil421• 2 years ago

I’ve used several of their sever motherboards and RAM. They are good products. There’s one in my NAS right now.

andruby• 2 years ago

I've bought and used supermicro servers since 2004. They sell good hardware without the IBM / HP premium.

hello_computer2• 2 years ago

They aren't as nicely made as HP's offerings, but solid, and good value for the price. I'd buy a used Super Micro before I'd buy a brand-new Dell, even if the Dell were cheaper.

linsomniac• 2 years ago

Since around 2000 I bought something shy of 1,000 of them for a small server hosting company. Mostly the smaller ones in the sub-$1,000 price range, and we had very good luck with them. With the exception of one year where we had a roughly 100% failure rate on the power supplies (same make, model, mfg as ones we had in service 5+ years), they were just workhorses at extremely reasonable prices.

After the power supply failures we started switching to their "twin^2" units (or something named like that) which were 2U RM boxes with redundant power supplies and 4x semi-blade servers, which again we could provision for the sub-$1,000 price.

I've since looked at pricing some systems from them as an alternative for the Dell servers we've been buying more recently, and oddly enough the prices all seem to be in the $10K+ range. A pretty big shock to see what used to be "dirt cheap servers" up in that range, but the RAM and SSDs really add up. Even though Dell seems to have insane pricing in their configurator for RAM and drives...

toast03• 2 years ago

Softlayer was built on all/mostly all SuperMicro servers up until IBM bought Softlayer and then there were a lot of Lenovo.

As an employee of a customer of Softlayer, the servers were very reliable. I have my personal hosting on a rented SuperMicro server now, and pretty happy with it, even if the hardware is 10+ years old (Xeon Lynnfield) and the IPMI requires ancient JNLP that barely works ... I only barely need IPMI (gotta console in to decrypt the disks on reboots, and it was handy for setup)

pavlov2• 2 years ago

Super Micro stock was clearly undervalued even on traditional P/E metrics as recently as 2022. And I believe the reason for the depressed stock price was Bloomberg’s allegations that China was using Super Micro’s motherboards as Trojan horses for spy chips:

https://www.datacenterdynamics.com/en/news/years-later-bloom...

Bloomberg originally broke this story in 2018, then repeated the allegations in 2021. But AFAIK it was never proven.

The Nvidia + Meta connection finally broke the spell and allowed investors to look at SMCI with fresh eyes.

diggan• 2 years ago

Bloomberg originally broke this story in 2018, then repeated the allegations in 2021. But AFAIK it was never proven.

Isn't that libel? Or something similar at least, not super familiar with US laws.

pavlov2• 2 years ago

My amateur understanding is that it’s very hard to successfully sue journalists for libel in the US because you’d have to prove malicious intent. A journalist writing a story based on their sources may have been misled by someone with an agenda, but didn’t write the false story with active malice.

verticalscaler• 2 years ago

First we had too big to fail, now we have too stupid to fail.

1letterunixname3• 2 years ago

Meta is wasting all kind of money ($40B across 2 years) on Nvidia, SMCI, and their own gear. SMCI and Nvidia stocks are now overvalued because there are no fundamentals to sustain this business. OpenAI/Microsoft may be an exception, but Meta is wasting money it doesn't have on profits that aren't there. These data centers and servers are being built on orders of Zuck without a concrete, specific product or purpose for their use. This is akin to a newbie business owner buying lots of inventory without orders.

fragmede2• 2 years ago

you know the saying; the market can stay irrational longer than you can stay solvent and all that. turns out P/E ratios determine a theoretical floor for the price, but as we've seen with Tsla and crypto, this shits all vibes anyway. AI isn't slowing down, or going to go anywhere, so these stocks, overvalued though you might see them, aren't going to go down anytime soon, in my opinion, so while what your say is true, NVDA and smci are safe to hold. the real question is what's going on with tsmc and mu, given their proximity to NVDA, and their lack of a pop.

caslon2• 2 years ago

Meta obviously has the money; $135B revenue, $88B in expenses, $18B in debt.

Even assuming the current push toward general AI is a bubble, which is not unreasonable, the company can afford to throw away billions of dollars. It doesn't matter at all; they own the money printer and can make as many bets in as many markets as they want.

The same GPUs that are presently being used to create semi-open AI projects can just as easily be repurposed to power a public launch of their Codec avatars, which are lightyears ahead of what Apple has, or for better prediction engines in what are quite probably the best sales engines of all time: Their websites.

Their data centers will be useful for the future of selling products to gullible consumers: Short-form video, which is the first chance in years that they've had to meaningfully take market share from Google.

Even assuming it was all vanity, Zuckerberg has earned the right at this stage in his career to make vanity plays. He still has majority control over his company, which shareholders have insisted upon, and he has an almost untarnished record of making incredible long-term bets that seem irrational at the time (Instagram acquisition, Whatsapp acquisition, arguably the Oculus acquisition).

He's earned drastic amounts of money for speculators, who have done little to deserve any of it. It would be a strange thing to argue that the speculators suddenly have a better grasp of what he's doing than he does; there are millions of speculators, but only one person with a track record like Zuckerberg.

matwood2• 2 years ago

Meta has plenty of money to spend. It's also been reported that Meta is using AI to get around Apple's ATT [1], with some reports saying that user ad targeting is better than before ATT came out [2]. Meta is already executing and succeeding on a concrete plan using their AI.

[1] https://www.forbes.com/sites/jonmarkman/2023/05/24/metas-ai-...

[2] https://www.socialmediatoday.com/news/meta-outlines-evolving...

hello_computer2• 2 years ago

I think most consumer market "reporting" is poorly-disguised market-manipulation. Best advice for your portfolio is to tune all of those assholes completely out.

underlipton2• 2 years ago

Something fun: pay attention to how many financial news headlines are formatted, "X as Y" or "Statement Presented as Fact: Says Opinion-Haver". The first implies that there's some causational link between X and Y, when none might exist; the writer can claim that they were just stating that two events were happening in tandem. The second biases a reader before they receive the crucial information that the preceding statement was not, in fact, fact.

(Also, lately, look out for listicles of stocks "to buy" (not financial advice, of course) and "Forget X".)

zettabomb2• 2 years ago

That was such an incredibly ridiculous story. I spoke with more than a few supposed infosec "professionals" who believed it entirely too. Never mind that there were zero reports from other journals (you know, like anything even slightly technical), that none of the cited sources would reiterate what they had supposedly said, or that the claimed mode of operation wasn't even possible. Their follow-up, despite having been disproven numerous times over, was even more ridiculous.

toast03• 2 years ago

If I'm assuming everyone involved had good intentions, the best thing I can guess is someone was speaking to the writer about the potential of the BMC being used for spying and got some details mixed up.

Consider: the BMC has access to the system via PCI-e, as well as kvm and comport. In some systems, the BMC is in the path of the main NIC. There have been some major software flaws in BMC software, including revisions that SuperMicro shipped, where passwords could be bypassed in the network interface.

Stuff like this https://web.archive.org/web/20140625065505/http://blog.cari.... and other things on this page http://fish2.com/ipmi/ are all pretty nasty if you thought IPMI was secure in the neighborhood of 2014.

darth_avocado• 2 years ago

The low valuation had less to do with the spying allegations and more to do with a history of accounting frauds. Obviously if you have a proven history of fudging up revenue numbers, investors are less likely to invest in you.

https://www.sec.gov/news/press-release/2020-190

guiriduro• 2 years ago

If that were true, Carvana wouldn't have an obscene valuation.

solarkraft• 2 years ago

... and they're not an obscure server maker anymore? What happened?

As far as I know, as much as being obscure, they've also been around forever.

jsnell• 2 years ago

I would have thought every server maker was able to sell every GPU they got their hands on at this point in the hype cycle. If SuperMicro is gaining market share, isn't it just a sign that Nvidia is giving them a bigger GPU allocation?

solumunus4• 2 years ago

That’s the rumour, NVDA give them higher priority because of a longstanding relationship.

johnklos5• 2 years ago

It'd be nice if they gave a damn about security. I had clients stop buying them because a glaring security problem was determined to be "not an issue" that they wouldn't fix.

It's one thing to say they wouldn't or couldn't fix products already made with the flaw, but it's another entirely to have a culture of security that says, "Sure, this flaw could cause your machine full, unfettered compromise, but because it's not likely to happen and not highly publicized, we don't care."

It makes me think they'll treat current and future security problems the same way. Security shouldn't be based on popularity contests.

Sorry, but not for me.

gizmo• 2 years ago

Do you have more info on this? iDRAC doesn't have the best security track record either, but people don't really seem to care.

dualboot• 2 years ago

Indeed. An OOB interface is something you should always handle like radioactive material. It's volatile, powerful, and should be handled with extreme care and caution.

johnklos5• 2 years ago

In a nutshell, the problem is this. I don't know whether this has changed, but this was true as of 2018 / 2019.

Most of their motherboards have IPMI with a separate a management port. A good number of them share IPMI management with the motherboard's primary ethernet port by default if nothing is plugged in to the management port. The motherboards have no way to configure them to NOT share the primary ethernet port beyond having the full stack of software needed to configure their IPMI.

What this means is that there're no jumpers one can change and no settings accessible in the BIOS that can force IPMI to stay on its own port, so if a BIOS gets reset, the battery dies or even just temporarily fails to provide power (like if it's being shipped by air and gets very cold), or you want to ship servers directly to a datacenter, the machine is 100% ownable on the public interface BY DEFAULT unless the management port is connected (and even then sometimes it decides to share the primary port - probably a function of link negotiation speed with the switch).

Sure, it's not a common occurrence, but it happens.

The solution for all the servers we already had deployed? We got ethernet loopback plugs for every one of them where the IPMI port wasn't already connected to a switch we administered.

A reasonable response: "Sure, that could be a problem sometimes. We can't change motherboards we already sold, but we'll bring this up with our design team so there'll be a jumper you can change so sharing will never happen, even with a reset BIOS."

Their response: "This isn't a security issue."

markhahn• 2 years ago

hasn't been obscure for a long time.

this says more about WSJ-reading "enterprise" IT than anything else.

dboreham• 2 years ago

If only I had known they were listed in the US. Just assumed they were an offshore company (based on their pretty terrible support). Disclosure: long time user.

jakehop• 2 years ago

SM has been producing good quality hardware for decades. I remember them from catalogues of my childhood. Obscure is not the right word here.

gnuser• 2 years ago

I’ve built entire DC’s out of Super Micro hardware, they rock.

For example, their quad opteron boards allowed me to make 64 core systems in 2013-era!

red-iron-pine2• 2 years ago

not quite whole data centers, but close.

their Atom half-step servers were very, very effective for building out call center routing and VM nodes. Atom has/had some problems with one-off issues like race conditions, but they worked quite well.

data center vendor also let us do some non-traditional airflow steps as long as it didn't screw with the hot aisle, so we packed racks with these things front and back

latchkey5• 2 years ago

Disclosure: Building a CSP business around SMCI products. Sorry if this sounds like an advertisement, I'm really just a happy customer.

I feel like the reason why SMCI has done so well in this AI round is because their server architecture is best in class and they have been able to support the internal changes necessary for AI workloads. They also support AMD CPUs, while others only offer Intel.

6 years ago, Cenly Chen / SMCI was saying AI was going to be huge and that total revenue would be $36B, in 2025 [0]. We are well past that number now. Amazing how AI turned out to be even bigger than anyone could have imagined, but at least they had some vision even back then.

Dell, Giga, ZTS are all behind in their offerings while SMCI is iterating and are now even getting to the point of water cooling and L11 manufacturing.

I just received a shipment of AS-8125GS-TNMR2 (8U MI300x) and the thing is an amazingly well designed beast of a chassis. Everything slots together perfectly. If you study the user documentation, the layouts of the internal block diagrams are fantastic and build for speed.

We are lucky enough to have been able to open an account directly with them. It wasn't easy and required a ton of due diligence, but working with the team there has been a top notch experience.

[0] https://www.youtube.com/watch?v=WzqBuiwkv5I

wmf2• 2 years ago

Gotta love doing a ton of due diligence for the privilege of (checks notes) buying an off-the-shelf product at full price?

latchkey5• 2 years ago

Oh, tell me where you can buy TNMR2+MI300x off the shelf! I checked BestBuy and they were out of stock.

bluesounddirect• 2 years ago

Friends don’t let friends drive supermicros .

renewiltord• 2 years ago

I love this investment because when Bloomberg News posted their SMCI story all the security suckers ate it up and dunked shares. Picked a bunch up at a 50% discount and they rebounded.

The problem is that security groupies are really eager for there to be obscure security flaws. HN was full of them. And they have this thing about "respected sources" and shit like that because they don't know how to evaluate things themselves.

Your loss, my gain. Haha.

blue11• 2 years ago

The article hints at a special relationship with NVIDIA, but it goes back a long time. They didn't move recently to be close to NVIDIA's HQ. They have been there for 30 years. For example, back in the 90s Supermicro was selling NVIDIA products and NVIDIA was buying Supermicro desktops for their offices.

matheusmoreira• 2 years ago

I wish I could afford to build a home server with these parts. Everything I read about them is great.

Super Micro Computer has gone from an obscure server maker to $60B market cap

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