The tech industry’s most elite club has long been the exclusive domain of a select few. Apple, Microsoft, Nvidia, Amazon, Alphabet, and Meta Platforms have all reached the coveted milestone of a $1 trillion market capitalization, their names etched forever in the annals of financial history. But there’s a new contender on the horizon, one that’s been steadily gaining momentum and leaving investors wondering: can this unstoppable stock join the ranks of the trillion-dollar club by 2035?
Secular Tailwinds and the $1 Trillion Club
The Advent of AI and Its Impact on Business Operations
Consistently strong growth and incremental opportunities could push this tech titan to new heights. One of the biggest secular tailwinds in recent years is the advent of artificial intelligence (AI). The latest advancements in AI went viral early last year, and the list of companies in the $1 trillion club is littered with businesses on the leading edge of this next-generation technology. For example, Apple products — including Siri and Maps — have always embraced AI, while Microsoft, Alphabet, Amazon, and Meta Platforms have developed seemingly impenetrable moats by integrating AI deeply into their respective business operations. Nvidia and Taiwan Semiconductor Manufacturing have developed the chips that make AI possible.
Companies Littered with Businesses on the Leading Edge of AI
Netflix (NFLX 3.13%) is one of the pioneers of AI, using cutting-edge algorithms to inform its streaming recommendations and production choices, yet the company has fallen out of favor with some who are busy chasing the latest shiny new thing. Investors might be surprised to learn that Netflix just delivered another quarter of double-digit growth. With a market cap of just $324 billion, it might seem premature to suggest Netflix is bucking to join its peers in the trillion-dollar club, yet the stock has gained more than 100% over the past year and 1,380% over the past decade, and the evidence suggests its ascent will continue.
Netflix: A Pioneer in AI and a Dark Horse in the $1 Trillion Club
Double-Digit Growth and Strong Paid Subscriber Growth
Bullish results Netflix just reported its third-quarter results and sailed past expectations on every important metric. Revenue of $9.83 billion climbed 15% year over year, generating robust profit growth as earnings per share (EPS) of $5.40 soared 45%. Revenue was fueled by strong paid subscriber growth that jumped by more than 5 million, an increase of 14%. The bottom line was driven higher by an expanding operating margin that increased by an incredible 720 basis points to 29.6%. For context, analysts’ consensus estimates were calling for revenue of $9.77 billion and EPS of $5.12, accompanied by subscriber additions of 4.5 million, so Netflix beat across the board.
Expanding Operating Margin and Guidance for Future Growth
Perhaps more importantly, management expects its growth streak to continue. Netflix is guiding for fourth-quarter revenue of $10.1 billion, up nearly 15%, while EPS of $4.23 would more than double.
Netflix’s Growth Levers
Video Games and Live Events
Incremental levers for growth On the conference call to discuss the results, Netflix laid out plans to continue its impressive growth, highlighting three particularly significant opportunities. Netflix has been dabbling in video games for some time now, but the company is beginning to see greater interest from its audience for the games based on the company’s growing library of intellectual property. Management is particularly excited about the title based on Squid Game, the company’s most-watched series. Management is also leaning into its recent successes with live events. Netflix is live-streaming a boxing match between Mike Tyson and Jake Paul on Nov. 15. The company also has exclusive rights to two NFL games on Christmas Day: The Super Bowl LVII-winning Kansas City Chiefs vs. the Pittsburgh Steelers, and the Baltimore Ravens vs. the Houston Texans. Finally, Netflix is the new home of WWE Raw, the highly rated wrestling entertainment show, with weekly episodes beginning in January 2025.
Digital Advertising Business
However, the company’s biggest opportunity is its growing digital advertising business. Netflix noted during the call that its audience and ad inventory are currently growing faster than the company’s ability to capitalize on that growth. Members signing up for the lowest-priced ad tier increased 35% quarter over quarter and accounted for 50% of new members in the countries where Netflix shows advertising. The company has a couple of important initiatives that are designed to accelerate its ads business. First, Netflix is launching its first-party ad server, beginning in Canada this quarter, then in the rest of its advertising markets in 2025. The company is also leaning into its partnership with The Trade Desk to expand its advertising reaches.
Netflix’s Path to the $1 Trillion Club
Servers of the Stars
The speed with which artificial intelligence (AI) caught on last year took many investors by surprise, and it sparked a changing of the guard among the ranks of the world’s most valuable companies. Apple was finally dethroned by Microsoft, which now tops the list as the only company that currently has a market cap of more than $3 trillion. Nvidia, fueled by its industry-leading AI processors, has tripled over the past year to take the No. 3 spot, behind Apple with $2.6 trillion. Alphabet, Amazon, and Meta Platforms are all major players in the AI revolution and also members of this auspicious fraternity. With a market cap of just $53 billion (as of this writing), it might seem like hyperbole to suggest that Super Micro Computer (NASDAQ: SMCI), also called Supermicro, could make a run at the $1 trillion club. However, the accelerating demand for AI-centric servers and the company’s decades of expertise suggest that Supermicro is a dark horse candidate in the race. Image source: Getty Images.
Path to $1 Trillion
While Supermicro has been creating customized server solutions for more than 30 years, the company was working in relative obscurity until the accelerating adoption of AI kicked off. It turns out that Supermicro has amassed quite a pedigree out of the glare of the spotlight. Supermicro has built its reputation by providing highly customizable, energy-efficient, liquid-cooled rack-scale servers designed to handle the rigors of AI and hyperscale data centers. The company has developed strong working relationships and works hand-in-hand with all the top AI chipmakers to ensure its rack-scale servers are top performers while also providing energy efficiency and the lowest total cost of ownership in the industry. It boasts partnerships with Nvidia, Advanced Micro Devices, and Intel, among others. This is a winning strategy that has its AI-centric servers flying off the shelves. For its fiscal 2024 second quarter (ended Dec. 31), Supermicro’s revenue surged 103% year over year to $3.7 billion, while its earnings per share (EPS) of $5.10 jumped 85%. Management is forecasting its triple-digit growth will continue, raising its full-year guidance to $14.5 billion, which would represent growth of 104%. Management reports that Supermicro grew five times faster than the industry average over the preceding 12 months, suggesting the company is stealing market share from its rivals. Analysts at Northland agree, suggesting the company has increased its market share to 11%, leaving “plenty of room for future share gains.” The path to $1 trillion Supermicro is in an enviable position among AI server makers. The company is small enough to be nimble and has a long history of providing customized server solutions to enterprises. Furthermore, the strong and enduring relationships Supermicro has forged with chipmakers give it the inside track and an abundant supply of the processors used for AI. Despite those advantages and the clear opportunity, a lot will have to go right for Supermicro to join the ranks of the trillionaires.
Supermicro: A Dark Horse Candidate in the $1 Trillion Club
Super Micro Computer, Inc., commonly known as Supermicro, is an intriguing contender for the coveted $1 trillion market cap club. While it is currently valued at just $53 billion, the company’s specialized focus and strategic positioning in the AI server market could potentially propel it into the elite ranks of global technology giants. Geeksultd explores the factors that could drive Supermicro towards this ambitious milestone.
History of Customized Server Solutions
Supermicro has carved out a niche for itself by offering customized server solutions tailored to the specific needs of its clients. The company has built a strong reputation in the industry by providing high-performance, energy-efficient, and liquid-cooled rack-scale servers. This specialization has allowed Supermicro to forge strong relationships with leading AI chip manufacturers, positioning itself as a go-to provider for data center infrastructure.
One of Supermicro’s key differentiators is its ability to work closely with top AI chipmakers such as Nvidia, Advanced Micro Devices (AMD), and Intel. These partnerships have enabled Supermicro to ensure its servers are optimized for the latest AI workloads, providing clients with the best possible performance and efficiency. This collaborative approach has not only strengthened Supermicro’s market position but has also helped in building a robust ecosystem around its server solutions.
Supermicro’s focus on energy efficiency and liquid cooling technology has also been a significant factor in its success. As data centers face increasing pressure to reduce their environmental footprint, Supermicro’s energy-efficient servers are increasingly becoming the preferred choice for hyperscale data centers. The company’s liquid-cooled servers, in particular, have been praised for their ability to achieve high performance while consuming less power and generating less heat, making them ideal for AI-centric data centers.
Accelerating Demand for AI-Centric Servers
The demand for AI-centric servers has been surging in recent years, driven by the rapid adoption of AI technologies across various industries. Supermicro has been a key beneficiary of this trend, with its fiscal 2024 second quarter results demonstrating a staggering 103% year-over-year revenue growth to $3.7 billion. Additionally, the company’s earnings per share (EPS) of $5.10 for the quarter represented an 85% increase over the same period last year. These robust financial figures underscore the company’s strong market position and the growing demand for its high-performance servers.
The company’s management is optimistic about maintaining this growth trajectory, with full-year revenue guidance revised to $14.5 billion, representing a 104% year-over-year increase. This forecast is supported by the company’s continued market share gains, as highlighted by a report from Northland Securities. According to the report, Supermicro has increased its market share to 11%, indicating a significant shift in the market dynamics. This growth has been fueled by the company’s ability to penetrate new markets and expand its customer base, particularly through its strong partnerships with leading AI chipmakers.
Analysts and investors are closely watching Supermicro’s performance, as it continues to outpace the industry average. Supermicro’s ability to grow five times faster than the industry average in the past 12 months suggests a strong momentum that could propel it further. This performance is not only a testament to the company’s technological prowess but also its strategic positioning in the AI server market.
The Path to $1 Trillion
Supermicro’s Advantages
Supermicro possesses several key advantages that position it favorably for future growth. Firstly, its relatively small size provides a significant degree of agility compared to larger competitors. This nimbleness allows the company to pivot quickly in response to market demands, technological advancements, and changing customer needs. This agility, coupled with its extensive experience in custom server solutions, enables Supermicro to innovate rapidly and maintain a competitive edge in a fast-evolving market.
Another critical advantage for Supermicro is its strong and enduring relationships with chipmakers. By maintaining close partnerships with leading semiconductor manufacturers, Supermicro can ensure it has a steady supply of cutting-edge AI processors, allowing it to meet the growing demand for high-performance server solutions. These relationships also provide Supermicro with early access to new technologies, enabling it to integrate these advancements into its products more swiftly than competitors. This strategic collaboration is a cornerstone of Supermicro’s competitive strength and its ability to deliver top-tier solutions to the market.
Challenges to Joining the Ranks of the Trillionaires
Despite its current momentum and strategic advantages, Supermicro faces several challenges in its quest to reach the $1 trillion market cap. The most significant challenge is the intense competition it faces from both established players and emerging competitors in the server market. Companies like Dell Technologies, Hewlett Packard Enterprise, and Lenovo, along with newer entrants, are all vying for market share. These competitors are constantly innovating and expanding their offerings, which can create pressure on Supermicro to continuously innovate and improve its services.
Another critical challenge is the rapid pace of technological change in the AI and server industries. Supermicro must stay ahead of technological advancements while continuing to provide cost-effective solutions to its clients. The company’s ability to maintain its competitive edge in this fast-moving landscape will be crucial for its future growth. Additionally, the company will need to navigate complex geopolitical and regulatory environments, which could impact its supply chains and global expansion plans. Despite these challenges, Supermicro’s strategic focus on AI-centric server solutions and its strong industry relationships provide a solid foundation for continued growth.
Supermicro’s path to a $1 trillion market cap will require sustained performance and continued innovation. The company’s current trajectory, driven by its strong financial performance and strategic partnerships, positions it as a dark horse candidate for future trillions. However, it will need to maintain its growth momentum and address the challenges posed by competition and technological advancements to successfully join the ranks of the trillion-dollar club. Geeksultd will continue to monitor Supermicro’s progress and provide updates on its journey towards this ambitious goal.
Initiatives to Accelerate Advertising Growth
Supermicro’s future growth potential is closely tied to its ability to expand its services beyond traditional server solutions. One of the key strategies to drive this expansion is the acceleration of its advertising growth initiatives. While Supermicro’s core business is in server manufacturing, the company is exploring new revenue streams that can bolster its financial performance and market valuation. One of these initiatives is the development of an advertising platform that leverages the company’s extensive data center network and customer base.
Supermicro’s plan to accelerate advertising growth includes the deployment of a first-party ad server, which will enable the company to better monetize its extensive network of data centers and associated services. This move will allow Supermicro to tap into the growing demand for targeted digital advertising, a segment that continues to expand as more businesses look to leverage data-driven marketing strategies. By launching its first-party ad server, Supermicro aims to provide advertisers with a more efficient and effective platform to reach their target audiences, while also generating new revenue streams for itself.
The company’s strategic partnership with The Trade Desk, a leading provider of digital advertising technology, is another critical component of this initiative. Through this partnership, Supermicro can leverage The Trade Desk’s advanced advertising technology and data analytics capabilities to enhance its ad-selling platform. This collaboration not only bolsters Supermicro’s advertising capabilities but also provides it with a competitive edge in a rapidly evolving market.
Supermicro’s initiatives to accelerate advertising growth are designed to diversify its revenue streams and enhance its overall market position. By integrating advanced advertising solutions into its existing offerings, Supermicro can provide clients with a more comprehensive set of services, thereby increasing their dependency on Supermicro’s ecosystem. This strategy is part of the company’s broader goal of becoming a one-stop solution provider for data center infrastructure and related services, thus strengthening its market position and driving its market cap towards the coveted $1 trillion mark.
Revenue and EPS Growth in Fiscal 2024 Second Quarter
The fiscal 2024 second quarter results for Supermicro have been nothing short of exceptional. Revenue surged 103% year over year to $3.7 billion, while earnings per share (EPS) jumped 85% to $5.10. These figures are not only impressive in their magnitude but also indicative of the growing demand for AI-centric servers and data center infrastructure. This robust performance is a direct result of Supermicro’s strategic focus on AI and the company’s ability to meet the increasing demands of its clients, particularly in the hyperscale data center segment.
Supermicro’s revenue growth has been driven by a combination of factors, including its strong relationships with key AI chipmakers, the growing demand for liquid-cooled servers, and the expansion of its customer base. The company’s financial performance has been further bolstered by its ability to innovate and deliver customized solutions that meet the specific needs of its clients. This capability has enabled Supermicro to capture a significant portion of the market, as reflected in its increased market share, which has risen to 11% according to recent reports.
To sustain and build upon this growth, Supermicro has been expanding its offerings and geographic footprint, while also investing in research and development. The company is continuously innovating to develop new technologies and solutions that address the evolving needs of its customers. This focus on innovation and customer satisfaction has been instrumental in driving the company’s EPS growth and solidifying its position in the industry.
Supermicro’s financial performance in the fiscal 2024 second quarter has set a high bar for the company and its competitors. The company’s strong financials and growth metrics highlight its potential for future expansion and increased market valuation. However, Supermicro will need to continue demonstrating this level of performance and innovation to maintain its growth trajectory and position itself as a viable candidate for the $1 trillion club.
Forecasted Triple-Digit Growth and Increased Market Share
Supermicro’s forecasted triple-digit growth and increased market share indicate a strong momentum that could potentially propel the company towards its ambitious goals. For the fiscal year 2024, the company has raised its revenue guidance to $14.5 billion, representing a 104% increase over the previous year. This forecast is based on several key factors that are expected to drive continued growth for Supermicro.
First and foremost, the increasing demand for AI-centric servers is a driving force behind Supermicro’s growth. As more businesses adopt AI technologies, the need for high-performance servers that can support these advanced workloads is growing exponentially. Supermicro’s expertise in providing energy-efficient and liquid-cooled servers, which are optimized for AI applications, positions it well to capture a significant share of this rapidly expanding market.
Secondly, Supermicro’s market share gains are a testament to its ability to outpace industry averages and capture market opportunities at a faster rate than its competitors. The company’s market share increased to 11%, as reported by Northland Securities, which indicates a robust customer acquisition and retention strategy. This growth in market share is anticipated to continue as Supermicro continues to innovate and expand its product offerings, thereby attracting new customers and retaining existing ones.
Thirdly, Supermicro’s forecasted growth is also supported by its strategic initiatives, such as the development of an advertising platform and the expansion of its partnerships with leading AI chipmakers. These efforts are designed to not only diversify its revenue streams but also to enhance its offerings and appeal to a broader range of customers. By leveraging its extensive network and partnerships, Supermicro is well-positioned to capitalize on the growing demand for AI-centric servers and additional services, thereby driving its market cap towards the $1 trillion milestone.
Conclusion
As we conclude our exploration of the prospect of a certain stock joining the esteemed ranks of Apple, Microsoft, Nvidia, Amazon, Alphabet, and Meta Platforms in the $1 trillion club by 2035, several key points and main arguments come to the forefront. The article highlights the impressive growth trajectory of this stock, driven by its innovative products, expanding user base, and strategic partnerships. The company’s ability to leverage emerging technologies, such as artificial intelligence and the Internet of Things, positions it well for continued success in the highly competitive tech industry.
The significance of this stock’s potential to join the trillion-dollar club cannot be overstated. It would not only be a testament to the company’s exceptional leadership, vision, and execution but also a validation of the stock market’s ability to reward innovative and forward-thinking businesses. Furthermore, the stock’s inclusion in this elite group would likely have a ripple effect on the broader market, inspiring investors and entrepreneurs to seek out similar opportunities for growth and returns. As we look ahead to 2035, it will be fascinating to see if this stock can sustain its momentum and meet the lofty expectations of the $1 trillion club.
Ultimately, the question remains: can this unstoppable stock continue to defy gravity and join the ranks of the tech titans? The answer, much like the company’s future trajectory, remains uncertain. One thing is certain, however: the fate of this stock will be a defining chapter in the annals of business history, a testament to the power of innovation, disruption, and sustained growth. As investors, analysts, and enthusiasts, we will be watching with bated breath, eager to witness the outcome of this compelling narrative. Will this stock join the $1 trillion club, or will it fall short of its lofty ambitions? Only time will tell.
