Supermicro Has Become One of the Best Performing AI Stocks in the Past Year

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The growing demand for AI has brought Supermicro’s total market valuation from just under $5 billion at the start of 2023 to $27.5 billion today.

Supermicro has been one of the best-performing stocks on the market since the start of 2023, having soared by 585 percent in a year. The high-density servers and storage equipment manufacturer benefited heavily from the artificial intelligence (AI) boom since its hardware excels at fast response times and handling large volumes of data, all required for training AI models.

The growing demand for AI has brought Supermicro’s total market valuation from just under $5 billion at the start of 2023 to $27.5 billion today. At one point, its stock even outpaced GPU and AI chip maker Nvidia and other popular tech stocks. Supermicro’s earning reports repeatedly sent shockwaves across Wall Street in the past year.

In addition, Supermicro’s CEO Charles Liang’s net worth reached an estimated $3.4 billion as of Jan. 31. SuperMicro announced preliminary results for the first quarter of 2024, showing provisional revenue of more than $3.6 billion, far exceeding previous estimates.

Founder’s Success

Charles Liang, also known as Jianhou Liang, is a Taiwanese American who has been recognized as one of Forbes’ 25 most accomplished entrepreneurs in the United States.

After completing his Master’s degree in Electrical Engineering at the University of Texas at Arlington in 1984, he worked for several Silicon Valley firms, including president and chief design Engineer of Micro Center Computer, a high-end motherboard design and manufacturing company, from July 1991 to August 1993.

After that, Mr. Liang decided to start his own business in the summer of 1993, and together with his wife, Sara Liu, he founded Super Micro in Silicon Valley, where his wife still serves as vice president and board member.

In 1995, Supermicro introduced the world’s first server motherboard with two CPUs, and soon afterward developed a motherboard with four CPUs.

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This innovative approach to motherboards was very forward-thinking for the tech industry at the time. Since early motherboards could only carry one CPU, and CPUs had poor computing power, graphics processing units (GPUs) were developed to assist the CPU in graphical calculations and operations, allowing the CPU to “focus” on computing.

In March 2007, Supermicro raised funds through an initial public offering (IPO) when it sold 8 million shares at $8 per share, raising $64 million. However, the price was much lower than the $9.50 to $11.50 price that underwriters expected at the time.

In 2009, the company sold about $720 million worth of computer servers and relevant products and employed nearly 1,100 people, and in 2010 it expanded further into Europe.

In 2012, Mr. Liang returned to Taiwan to set up a factory, and in 2019 he chose Taoyuan’s Bade District for the expansion of its production base while investing a further NT$20 billion ($600 million) to produce a large number of new servers. When the plant officially opened in 2021, it was expected to be able to produce 1 million sets of servers per year, with a production value of NT$60 billion ($2 billion), which is almost half of the company’s production capacity.

Benefiting from the increasing demand for servers, the company has manufacturing and operation centers in the Americas, Asia, and Europe, and employs more than 4,000 people worldwide. The company currently produces servers that are heavily used in AI computing and has been a key partner of NVIDIA for more than two decades.

Alleged CCP Infiltration

Supermicro’s 30 years of operation have not always been a smooth ride. One of the challenges was surrounding funding linked to China and Russia.

In 2018, Mr. Liang borrowed nearly $13 million from his own brother’s wife after he had to repay two margin loans secured by Supermicro’s stock, and the decision caused the company to be suspended from stock market trading by Nasdaq on Aug. 23 that year after accountants found “significant deficiencies” in its financial reports, a decision that at one point sent the company’s stock plummeting.

Separately, Bloomberg’s Businessweek cited unnamed corporate and government sources on Oct. 4, 2018, as saying that China’s People’s Liberation Army had forced U.S. Supermicro’s Chinese subcontractors to add microchips with “hardware backdoors” to their servers.

The report alleged that Supermicro servers with “hardware backdoors” have been sold to U.S. government agencies, including the CIA and the Department of Defense, Apple, Amazon, and other contractors. Supermicro later denied the allegation, saying that no U.S. government agencies had contacted them. Apple and Amazon also denied that Chinese spies had planted backdoor chips in their hardware.

However, Amazon admitted that the vulnerabilities found in Supermicro’s products were related to software, not hardware. Facebook also found problems in Supermicro’s products, identifying malware in the company’s software and deleting servers from its data center.

A second report published by Bloomberg on Oct. 9, 2018, indicated that an unnamed American telecommunications company had suffered an attack as a result of a “hardware backdoor” implanted into an Ethernet connector in a server that was used by Supermicro. A few days later, Supermicro announced that it was investigating the matter and filed a letter with the SEC to express its confidence that no “hardware backdoor” had been implanted in the manufacturing process of its motherboards.

In addition, Bloomberg reported in February 2021 that Supermicro had been compromised by the CCP since 2011, but that the U.S. intelligence community had kept intelligence involving the CCP under wraps and had only warned a handful of potential targets.

Supermicro did not respond to a request for comment from The Epoch Times.

Supermicro and China’s Nanjing Fiberhome Telecommunications Technology have a joint venture called Super Micro Computer BV in Hertogenbosch, the Netherlands. However, in November 2021 the Netherlands-based company was revealed by the media to have won a contract to provide servers for “public security purposes” to China’s Xinjiang Production and Construction Corps, which was sanctioned by the United States in 2020 due to human rights abuses and the surveillance and suppression of the ethnic Uyghurs.

The U.S. government blacklisted China’s Nanjing Fiberhome Telecommunications Technology in 2020 for its possible involvement in human rights abuses and the oppression, detention, and surveillance of Uyghurs in Xinjiang.

Two Russian dissident writers, Andrei Soldatov and Irina Borogan, accused Supermicro and China’s Lenovo Group on Dec. 21, 2021, of each providing 30 servers to the Moscow Control Center for network censorship. In response, Supermicro said, “Supermicro complies with applicable laws and regulations, and our policies are consistent with international principles of human rights.”

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