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Charts Look Amazing at Dawn of AI Era

January 30, 2024

I have my way of doing charts. I like them to be very long-term. I like the message to be obvious. I am especially impressed when many charts look good. The best-looking charts come after a period of weakness – shares need to crouch to spring.

All that is happening now. The charts look incredible suggesting that an exciting period lies ahead for investors who are choosing the right shares and ETFs to buy. Hopefully, that includes you guys.

This is arguably the world’s most important chart – the Nasdaq 100. We have a new and I believe an important chart breakout. There is a cascade of consequences which follow from this chart.

One option is to buy an ETF which tracks it, QQQ. This can be done with or without leverage.

A second option is to buy QQQ3 with leverage built in.

A third option is to start looking at the constituents of the Nasdaq 100. It’s an average so some will be doing better than the index and others worse. A good move would be to create a portfolio composed only of shares which are doing better, ideally much better, than the index. This would be a sort of homemade ETF. Again these shares can be purchased with or without leverage.

Super Micro (SMCI) explodes

We don’t have to confine our attention to shares in the Nasdaq 100. Recently I mentioned a share which was being added to the QV Innovation Portfolio. This share is showing signs of being an explosive performer. The chart is shown below and is as strong as it gets.

Charts can be hot, red hot or like this one – WHITE HOT!

Super Micro Computer’s standout quarterly results and a bullish sales guidance raise hopes that tech stocks can continue to gain from demand fueled by artificial intelligence. In the short term, the news may also be boosting Nvidia stock.

In any case, Super Micro — which sells servers, many of which are powered by Nvidia chips and can be used for AI-linked computing — delivered Nvidia-style results late Monday, trouncing Wall Street’s expectations and significantly raising its outlook.

Super Micro reported earnings of $5.59 a share on revenue of $3.66bn in the three months to the end of December, which is the second quarter of the company’s 2024 fiscal year. Analysts surveyed by FactSet had expected earnings of $5.16 a share on revenue of $2.89bn.

The outlook was even better. Super Micro raised its guidance for fiscal 2024 revenue, expecting sales in the year to the end of June to be in a range of $14.3bn to $14.7bn, well above a prior forecast of $10bn to $11bn.

“While we continue to win new partners, our current end customers continue to demand more of Supermicro’s optimised AI computer platforms and rack-scale Total IT Solutions,” said CEO Charles Liang in a statement. “As our innovative solutions continue to gain market share, we are raising our fiscal year 2024 revenue outlook.”

Super Micro shares — already up almost 75pc so far this year as of Monday’s close — surged a further 12pc in premarket trading on Tuesday, set to open at a record high.

The stock market’s surge in early 2024 has been driven in part by renewed hopes that AI will spur sustainable and strong demand for tech. Super Micro’s results and upbeat guidance are the latest sign of this trend — and could usher in more gains.

“In the wake of yesterday’s bumper earnings and outlook from Super Micro Computer, there is a renewed feeling of optimism around the potential size and longevity of this AI boom,” said Joshua Mahony, an analyst at broker Scope Markets. “We can clearly see that businesses within the sector are seeing demand intensify as AI adoption grows.”

Dow Jones Newswires, 30 January 2024

The Q4 results were incredible.

I’m delighted to share our second quarter results, which show a record-breaking performance for Super Micro. We achieved revenue of $3.66bn, a 133pc increase from last year, and earnings per share of $5.59. This is our first quarter ever with over $3bn revenue. More importantly, this single quarter’s revenue surpassed our annual revenue for 2021. This fantastic quarterly result was driven by strong demand and improving supply conditions for GPU and related key system components.

Our rack-scale plug-and-play IT and AI Total Solution continues to gain more new customers, along with their confidence in Super Micro as their go-to infrastructure partner. Our AI rack-scale solutions, especially the Deep-Learning and LLM-optimized based on NVIDIA HGX-H100, continue gaining high popularity. The demand for AI inferencing systems and mainstream compute solutions has also started to grow.

The exciting news is that, finally, we are entering an accelerating demand phase now from many more customer wins. To support faster growth, we have increased our working capital recently by raising about $600m with an equity offering. Moreover, we have other programs to increase our cashflow without additional equity dilution to support short and long-term sustainable growth. Overall, I feel very confident that this AI boom will continue for another many quarters, if not many years. And together with the related inferencing and other computing eco system requirements, demand can last for even many decades to come, we may call this an AI revolution.

Charles Liang, Super Micro Computer, Q4 2023, 29 January 2024

AI Revolution May Last for Decades

Results like this don’t come along every day. These shares are a SCREAMING BUY!

Remember my rule. Don’t be afraid of the obvious. This company is doing incredibly well. As with Nvidia demand is exploding for its products. Surf that wave.

Super Micro is at the heart of the action.

Supermicro is at the forefront of the AI revolution, where the pace of innovation is accelerating. We are leading the race by developing the most innovative AI infrastructure on many platforms at rack scale, for almost any industry, and for any market vertical. As the market leader, we have been preparing to more than double the size of our current AI portfolio with the coming soon NVIDIA CG1, CG2 Grace Hopper Superchip, H200 and B100 CPUs — GPUs, L40S Inferencing-optimised GPUs, AMD MI300X/MI300A, and Intel’s Gaudi 2 and Gaudi 3. All these new platforms will be ready for high volume production in the coming month and quarters.

Moreover, we are adding further optimised new architectures for the upcoming NVIDIA GPU product lines. Our AMD MI300X systems are sampling now, and our Intel Gaudi 3 system is coming soon. More importantly, we are continuing to invest and innovate in datacentre and enterprise liquid-cooling technology to make sure these high-power AI platforms are in line with our green computing methodology, while improving the performance, efficiency, and reliability of systems in a datacentre.

Charles Liang, Super Micro Computer, Q4 2023, 29 January 2024

Strategy – Buy Super Micro Computer

This is a market where it pays to be bold. My advice is to go for it. Remember all that stuff about a duck? If it looks like an exciting company has an exciting share chart, and is part of an exciting technology trend then most likely it is [a duck] an exciting share to buy.

Share Recommendations

QQQ. Buy @ $428

QQQ3. Buy @ $171.45

Super Micro Computer. SMCI. Buy @ $495.50

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