SMCI's Rack-Scale AI Strategy: Is it the Next Growth Engine?

Super Micro Computer SMCI in its first-quarter fiscal 2026 mentioned that it scaled up to an internal power capacity of 52 megawatts and is on track to scale up its rack capacity to 6,000 racks per month, including 3,000 direct liquid cooling racks within fiscal 2026 as the demand for these products rises to support AI and HPC workloads.

SMCI offers its rack-scale compute architecture for large-scale AI training, enterprise AI inference and training, visualization and design, content delivery and virtualization and AI edge. These racks come with NVIDIA HGX B200 8-GPU systems, NVIDIA GB200 Grace Blackwell SuperChip, HGX H100/H200 SXM 8-GPU or 4-GPU nodes, NVIDIA H100 NVL & H200 NVL, NVIDIA L4 GPUs and NVIDIA RTX PRO 6000 Blackwell GPUs.

Furthermore, SMCI’s upcoming facilities in the United States, Taiwan, Malaysia, the Netherlands, and the Middle East are explicitly designed for rack-level production, not just server assembly. For SMCI, rack-scale plug-and-play servers have become an integral part of its larger data center building block (DCBBS) strategy.

However, the rack-scale deployment is affecting SMCI as the company has to incur higher costs and lower margins as it scales a new mega-scale GB300 optimized rack platform. SMCI faced a headwind in the form of revenue decline in the first quarter of fiscal 2026, as its shipments were delayed to the second quarter due to a custom rack platform upgrade.

However, it is evident that the demand for SMCI’s rack-scale products is rising as the company has been able to approximately treble its revenues in the past two years. For fiscal 2026, the Zacks Consensus Estimate for SMCI’s revenues is pegged at $36.5 billion, indicating year-over-year growth of 66%.

How Competitors Fare Against SMCI

Super Micro Computer competes with Dell Technologies DELL and Hewlett Packard Enterprise HPE in the AI and data center market. Dell Technologies and Hewlett Packard Enterprise are both major suppliers of servers and storage systems, with a broad customer base across enterprises and cloud providers.

In the rack scale server domain, Dell provides solutions like Dell Integrated Rack 5000 Series for the highest level GPU density in standard racks with advanced thermal management and Dell Integrated Rack 7000 Series with 21-inch open compute project standards meant to support multiple generations of CPUs and GPUs. Hewlett Packard Enterprise offers the ProLiant series.

SMCI’s Price Performance, Valuation and Estimates

Shares of Super Micro Computer have plunged 34% in the past six months against the Zacks Computer – Storage Devices industry’s growth of 65.9%.

SMCI 6-Month Performance Chart

From a valuation standpoint, SMCI trades at a forward price-to-sales ratio of 0.46, lower than the industry’s average of 1.81.

SMCI Forward 

The Zacks Consensus Estimate for Super Micro Computer’s fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 3.58% and 41.5%, respectively. Estimates for fiscal 2026 earnings have been revised downward in the past 30 days.

Super Micro Computer currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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