Super Micro’s Nvidia Dependence Is Getting a Bigger Test

This article first appeared on GuruFocus.

Shares of AI server maker Super Micro Computer Inc. (SMCI, Financials) declined ahead of earnings, as investors considered how Nvidia’s increasing dominance over artificial-intelligence infrastructure would alter the prospects for server partners.After a strong recent run, the stock fell about 3% Thursday. Elon Musk chimed in on the argument, adding that SpaceX aims to build its future AI infrastructure using Nvidia technology.This is not necessarily bad news for Super Micro, which sells systems built around Nvidia chips. The bigger question is how much value exists for server vendors as Nvidia moves more deeply into full artificial intelligence systems.Super Micro is expected to release fiscal fourth-quarter earnings Aug. 11. The business warned earlier that revenue will likely be at the low end of its projection of $11 billion to $12.5 billion.Valuation and margins will probably be as important as revenue growth, and Wall Street is wary of the recent advances in the stock.Investors will look at orders, gross margins and demand for Nvidia-based systems for clues on whether Super Micro can continue to gain from the AI buildout.