So much for the AI hype and circular contracts that we have seen as of late! Yesterday, Super Micro Computer (SMCI), high performance computing server manufacturer, which saw its revenue skyrocket along with Nvidia (NVDA) almost 10 times in a short few years, to support the plumbing of eagerly anticipated and participated AI gold rush, announced the following:
Finally, it seems like that rational heads may begin to prevail as it always does – wisdom prevails in the end. Sometimes, it is too late (like this time around) and if we are fortunate, it is early enough. Ultimately, the costs may need to be justified and profitability becomes the guiding factor as the blind faith goes only so far.
In here, even the best-case scenario for Super Micro was not so glimmering 15%. Instead, it will be more like a flat linish now…
As a result, the stock went down by 9% on the news yesterday.
It is only the beginning of the AI mania reckoning. We certainly seem to be in the final innings of an AI gold rush and the beginning phases of the “Great Reset”. The unfortunate part is that along with that, it will take many aspects of economy down as so far that has been the only shining city on the hill.
This may well have been the first shoe to drop could be Super Micro. The day Nvidia disappoints, it will be really ugly and there will be no place to hide. The second shoe or countless more will be lining up soon after…
So, what is the message from Super Micro warning? Get off the band wagon as we have indicated in the earlier posts…fast…
Naturally, questions arise such as…
- If the AI business is so strong why such a significantly downward revenue guidance by Super Micro, a leading indicator like Nvidia providing the guts of AI?
- If the AI gold rush is a reality, not a hype (in spite of its real potential) then why the numbers have started to plateauing instead of continuing its breakneck speed like initial few quarters at Nvidia?
- If the AI is going to transform every aspect of our lives NOW (eventually it will) then why did we see numerous “circular” investment and contractual agreements?
- If AI gold rush requires about a trillion-dollar worth of investments from various constituents as has been professed, what is another billion or two for Super Micro that they could not cough up this quarter?
Basically, the timing is impeccable and it is all coming together just perfect with the slew of announcements of these circular investments between OpenAI, Nvidia, Oracle, AMD, etc., which signify the tail end of the AI gold rush and now Super Micro is a proof in the pudding.
In good old days, such contracts could have been called “let us scratch each other’s backs” at best and Ponzi scheme at worst as criminals would try to extract every last dollar from the innocent ones.
The real or even more powerful proof will be in the numbers from Nvidia in about a month. Canary has spoken its last words before it died from the toxic gases of gold mine (or coal?).
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