March 18 (Reuters) - Super Micro Computer ( SMCI ), which joins

the S&P 500 on Monday, enjoys a rare advantage among server

makers that are trying to tap the generative AI boom - close

ties with Nvidia ( NVDA ) that help it launch products faster than rivals

Dell and Hewlett Packard Enterprise ( HPE ).

The company has historically been among the first

to receive artificial intelligence chips from Nvidia ( NVDA )

and Advanced Micro Devices ( AMD ) as it helps them check server

prototypes, giving it a head start over rivals, analysts and

industry experts said.

That has helped turn the company into a key supplier of

servers essential for generative AI apps and sent Super Micro's

shares up 289% so far this year.

Some analysts estimate Super Micro, whose California

headquarters are less than 10 miles away from those of Nvidia ( NVDA )

and AMD, can within just "a few weeks" manufacture, assemble,

test and ship a server rack, if components are available.

"Super Micro has developed a model that is very, very quick

to market. They usually have the widest portfolio of products

when a new product comes out from Nvidia ( NVDA ) or AMD or Intel ( INTC )," said

Hans Mosesmann, an analyst at Rosenblatt Securities.

Super Micro's revenue more than doubled in the last three

months of 2023 and analysts polled by LSEG expect triple-digit

percentage growth to continue till at least the September

quarter of 2024.

Bank of America analysts estimate the company's share of the

AI server market to grow to about 17% in 2026, from 10% in 2023.

That optimism is reflected in Super Micro's growing market

value, which now stands at $60 billion, compared with some $5

billion before the launch of ChatGPT in November 2022.

The AI demand has also lifted shares of Dell by 40% this

year, including a gain about 32% earlier this month after an

upbeat annual forecast. HP Enterprise shares are down about 1%

in 2024.

Both Dell and HP Enterprise did not respond

to requests for their go-to-market times for AI servers.

But the massive rally also means that Super Micro is now

trading at 40 times expected earnings, far higher than its PE of

15 last December, according to LSEG data.

The expensive PE valuation increases the risk of selloff if

Super Micro fails to meet future earnings expectations.

LIQUID COOLING

Super Micro is also riding on a rush of demand for liquid

cooling tech from data center operators deploying much hotter

and power-hungry AI chips, analysts and industry experts said.

They added that the heat produced by chips used in AI

servers has more than doubled and is set to double again in the

next 2 to 3 years.

Super Micro's tech, developed in-house, involves putting

cold liquid over a plate placed on top of a chip and cuts power

consumption by about 40% compared with air cooling.

By 2030, liquid cooling is projected to become the dominant

method for cooling servers, said Ben Smith, product head at

immersion cooling technology provider Green Revolution Cooling.

HP Enterprise and Dell, however, expect the adoption of

liquid cooling to be much lower.

Analysts also cautioned it could be tough for Super Micro to

maintain its advantage in AI servers as larger rivals shift

focus to the market, adding that the company has been offering

its products at cheaper rates to gain market share.