Large companies are continuing to invest heavily in AI during this earnings season, but they are facing a challenge with the massive electricity needs of AI servers. With even more powerful AI chips on the horizon, this issue is expected to worsen.
To address the energy demands of AI, data center operators are beginning to adopt direct liquid cooling (DLC) for AI server racks instead of the traditional air-cooled racks. While liquid-cooled data centers only made up about 1% of the market at the beginning of the year, they are now gaining traction and could disrupt the AI server industry.
Super Micro Computer (NASDAQ: SMCI) is leading the charge in this industry disruption. The company unveiled its new liquid-cooled solutions at Computex in June and has already seen strong demand for its liquid-cooled racks. In fact, Supermicro shipped about 1,000 liquid-cooled racks in June and July, accounting for more than 15% of all new global data center deployments during that time.
Despite a decline in gross margins last quarter due to expedited shipping costs for liquid-cooling components, Supermicro is positioning itself to dominate the DLC market. The company projects that 25% to 30% of all new data center deployments will use DLC solutions in the next 12 months, with a significant portion coming from Super Micro.
While some analysts question why Supermicro isn’t charging more for its DLC solutions, the company is focused on disrupting the industry with large volumes at a lower price. This strategy could pave the way for more market share and increased overall spending on AI servers.
With the rapid growth of DLC expected to continue, Supermicro’s investments in direct liquid cooling for AI data centers could prove to be a game-changer. Investors looking to capitalize on this trend may want to consider Super Micro Computer as a potential investment opportunity.