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OpenAI boosted its 2030 compute projection to $750B.
Anthropic & AMD announced a multi-billion-dollar chip partnership on Wednesday.
Although many AI-related stocks have corrected from extended levels in recent weeks, the latest AI news suggests that the AI revolution is still well intact. Below are three of the most important AI-related headlines.
Super Micro Computer Margins Expected to Explode
Super Micro Computer ((SMCI - Free Report) ) builds and sells high-performance AI servers, storage systems, and advanced liquid-cooling technology for enterprise data centers. On Tuesday night, SMCI reported preliminary Q4 financial results that blew away Wall Street expectations. Q4 revenue is expected to be near the low end of its $11 billion to $12.5 billion guidance. However, the company expects gross margins to explode to ~15% to ~17% from ~8%. Additionally, SMCI recorded more than $60 billion in fresh orders during the quarter, pushing its backlog to a record high. SMCI shares, which have been weighed down by legal difficulties, bolted more than 20% in midday trading on Wednesday.
Image Source: Zacks Investment Research
SMCI industry peers and competitors Dell Technologies ((DELL - Free Report) ) and Hewlett Packard ((HPE - Free Report) ) jumped in unison after a Wolfe analyst said that SMCI’s margin surprise could be a positive read-through for the two companies. Read more about the bull case for Dell here.
AI Spending and Demand is Not Slowing
A key argument of AI bears is that the massive spending on AI infrastructure will soon slow. Although it will have to slow eventually, the most recent headlines suggest that insatiable AI spending will continue into the foreseeable future. For example, on Wednesday, ChatGPT parent OpenAI raised its projected compute spending through 2030 to $750B from its previous forecast of $600B earlier this year. OpenAI is also investing $20B in a 3.2GW Georgia data center, which will be its first major site designed and developed in-house rather than leased from cloud providers. According to the latest projections, data center demand will nearly quadruple by 2035.
Image Source: Zacks Investment Research
Anthropic & AMD Announce Partnership
Meanwhile, OpenAI is not the only one looking to increase its AI infrastructure. Claude parent Anthropic, currently considered the AI leader, announced Wednesday that it will purchase up to 2 gigawatts of Advanced Micro Devices’ ((AMD - Free Report) ) next-generation MI450 chips starting in the first half of 2027. AMD will separately invest up to $5 billion into Anthropic (which will trigger when certain deployment milestones are met).
Bottom Line
While recent stock pullbacks in AI stocks have concerned investors, the underlying fundamentals of the AI revolution tell a vastly different narrative. Soaring margins, long-term compute commitments, and burgeoning partnerships all suggest that the AI buildout is far from over.
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The AI Bull Case Lives On: What You Need to Know
Key Takeaways
Although many AI-related stocks have corrected from extended levels in recent weeks, the latest AI news suggests that the AI revolution is still well intact. Below are three of the most important AI-related headlines.
Super Micro Computer Margins Expected to Explode
Super Micro Computer ((SMCI - Free Report) ) builds and sells high-performance AI servers, storage systems, and advanced liquid-cooling technology for enterprise data centers. On Tuesday night, SMCI reported preliminary Q4 financial results that blew away Wall Street expectations. Q4 revenue is expected to be near the low end of its $11 billion to $12.5 billion guidance. However, the company expects gross margins to explode to ~15% to ~17% from ~8%. Additionally, SMCI recorded more than $60 billion in fresh orders during the quarter, pushing its backlog to a record high. SMCI shares, which have been weighed down by legal difficulties, bolted more than 20% in midday trading on Wednesday.
Image Source: Zacks Investment Research
SMCI industry peers and competitors Dell Technologies ((DELL - Free Report) ) and Hewlett Packard ((HPE - Free Report) ) jumped in unison after a Wolfe analyst said that SMCI’s margin surprise could be a positive read-through for the two companies. Read more about the bull case for Dell here.
AI Spending and Demand is Not Slowing
A key argument of AI bears is that the massive spending on AI infrastructure will soon slow. Although it will have to slow eventually, the most recent headlines suggest that insatiable AI spending will continue into the foreseeable future. For example, on Wednesday, ChatGPT parent OpenAI raised its projected compute spending through 2030 to $750B from its previous forecast of $600B earlier this year. OpenAI is also investing $20B in a 3.2GW Georgia data center, which will be its first major site designed and developed in-house rather than leased from cloud providers. According to the latest projections, data center demand will nearly quadruple by 2035.
Image Source: Zacks Investment Research
Anthropic & AMD Announce Partnership
Meanwhile, OpenAI is not the only one looking to increase its AI infrastructure. Claude parent Anthropic, currently considered the AI leader, announced Wednesday that it will purchase up to 2 gigawatts of Advanced Micro Devices’ ((AMD - Free Report) ) next-generation MI450 chips starting in the first half of 2027. AMD will separately invest up to $5 billion into Anthropic (which will trigger when certain deployment milestones are met).
Bottom Line
While recent stock pullbacks in AI stocks have concerned investors, the underlying fundamentals of the AI revolution tell a vastly different narrative. Soaring margins, long-term compute commitments, and burgeoning partnerships all suggest that the AI buildout is far from over.