Last week we saw earnings from twenty of our companies. Written reports are available for paying clients, of course, and Drill Down Earnings video podcasts on nine (PLTR, FN, AMD, SNAP, GOOG, COHR, QCOM, ARM, NET, FN and AMZN) of those are for all to enjoy. 

It was quite a week and this week will be no less exciting (see our Plans for the Week) below. 

As always, I’m focused on three things:

1. Technology-driven-change;

2. the latest startup trends, and;

3. stock fraud.

Companies Discussed

In This Note:

• Companies Discussed

• Cool Running: Vertiv's Hot Streak

• SuperMicro's Super-Sized Problems

• AMD: The AI Challenger's Rocky Road

• Tweet O’ The Week

• Epistrophy In The News

• Upcoming Events We’ll Be Following

• Availability This Week

Cool Running: Vertiv's Hot Streak

Enter the data center builders. As the world looks beyond NVIDIA (NVDA: NASDAQ) for the companies building out global AI data center infrastructure, Columbus, Ohio’s Vertiv Holdings (VRT: NYSE) is emerging. Vertiv's comprehensive portfolio spans power management, thermal systems, and IT infrastructure — positioning them to shape how next-generation data centers operate rather than merely supply components. Their recent partnership with NVIDIA to develop power and cooling reference designs for the GB200 NVL72 platform exemplifies this strategic approach.

From Power to Cooling: A Complete Portfolio

Last quarter, the company delivered impressive Q3 2024 results amid surging demand for artificial intelligence infrastructure. Organic sales grew 19% year-over-year while orders increased 37% on a trailing twelve-month basis, showcasing the company's momentum in data center builds globally.

Management projects the global data center footprint will expand at a 24% CAGR through 2028, driving demand for 100GW of new power capacity by 2029. Each megawatt represents $2.75-3.5 million in potential revenue for Vertiv, underscoring the scale of this transformation.

The Liquid Cooling Imperative

The migration toward liquid cooling marks a fundamental shift in data center design. Vertiv strengthened their position through the acquisition of CoolTera's chiller technology assets, anticipating liquid cooling growth at a 30% CAGR compared to 10% for traditional air and heat rejection solutions. This transition addresses core engineering challenges as rack densities escalate from 30kW to potentially 500kW in AI-optimized environments.

Their newly announced CoolPhase Flex solution enables seamless transitions between air and liquid cooling — essential flexibility for facilities designed to operate for decades. This adaptability proves crucial as operators navigate evolving workload requirements across traditional computing and AI applications.

Strong Financial Performance

Q3 2024 demonstrated robust execution with adjusted operating margins expanding 310 basis points to 20.1%. Free cash flow reached $336 million in the quarter, with year-to-date figures hitting $773 million. The company raised guidance throughout FY24, now projecting $975-1,025 million in adjusted free cash flow.

For FY25, management expects:

• 16-18% organic sales growth

• Adjusted operating margins of 20.5-21.5%

• Adjusted EPS of $3.50-3.60

Hot: Or Not?

Power availability, permitting delays and skilled labor shortages constrain industry growth and have been a particular problem for Vertiv. Competition intensifies in liquid cooling as Hewlett Packard Enterprise (HPE: NYSE) and Dell Technologies (DELL: NYSE) expand their offerings.

Yet Vertiv's integrated portfolio and global network of 4,000+ service engineers differentiate their position. Their ability to customize solutions while maintaining quality has secured relationships with major customers like QTS and Compass Datacenters.

The Path Forward

The five-year strategy targets 12-14% annual organic growth and 25% adjusted operating margins by 2029. Recent investments in R&D and capacity expansion, including new facilities in the Americas and India, demonstrate commitment to meeting accelerating demand. While timing of the AI rollout could be bumpy, Vertiv's $7.4 billion backlog provides solid visibility into near-term growth. They come into this with some advantages:

• Leadership in critical power and cooling technologies

• Comprehensive service capabilities

• Strong customer relationships in growing markets

Big challenges remain, including industry investment pacing, supply chain resilience (where are the Blackewells?), competitive dynamics in liquid cooling and scaling execution.

That said Vertiv's combination of technical leadership and operational execution warrants attention. Their improving margins and cash generation demonstrate effective translation of market opportunities into financial results.

SuperMicro's Super-Sized Problems

Earnings this week from Super Micro Computer. (SMCI: NASDAQ)?! Say it ain’t so! The Silicon Valley company has been capitalizing on artificial intelligence (AI), with demand for its servers skyrocketing. But as its February deadline for accurate financial reporting nears and the company says it’s FINALLY going to release its first earnings report since the June 30, 2024 quarter ( a report it couldn’t back up with audited financial results) on February 11, 2025.

A History of Financial Red Flags

SuperMicro’s record of financial misreporting is well-documented. In 2018, it was temporarily delisted from Nasdaq after failing to file financial statements. That led to a $17.5 million settlement with the Securities and Exchange Commission (SEC) in 2020 for improperly recognizing over $200 million in revenue. The SEC cited “widespread accounting violations” and ordered CEO Charles Liang to reimburse $2.1 million. (Liang was not personally charged with misconduct. His reimbursement was pursuant to the clawback provision of the Sarbanes-Oxley Act, which mandates that CEOs return certain compensations in cases where the company is required to restate its financials due to misconduct.) Despite these penalties, a 2024 lawsuit alleges SuperMicro has returned to aggressive revenue recognition practices. Key executives implicated in the earlier scandals were quietly rehired, raising further concerns about corporate oversight and accountability. And while the company says that has been no misconduct among the rehired individuals, they’ve since admitted to lapses in internal processes, such as not promptly informing the Audit Committee or independent auditor about certain rehires. 

The Investigation That Answered Nothing

SuperMicro commissioned an internal investigation into its financial practices, but the special committee leading it consisted of a single director, Susie Giordano, appointed just months earlier in August 2024. 

Yes, it was a one-person “committee” consisting of a single company insider.

The findings? No misconduct! Phew!

Yet, the “committee” still recommended hiring a new CFO, Chief Accounting Officer and Chief Compliance Officer—suggesting deeper issues. The company has yet to disclose the full investigation report, leaving investors in the dark.

Adding to the uncertainty, SuperMicro has no permanent CFO. Former CFO David Weigand announced his resignation in 2023 and the position remains unfilled. A company of this size—especially one with a history of financial misreporting—should not be operating without a financial leader. The lack of transparency around financial leadership raises further red flags.

The Web of Related Party Transactions

SuperMicro’s operations are deeply intertwined with CEO Charles Liang’s family. The company acknowledges significant reliance on family-controlled entities, including:

• Ablecom Technology (run by Liang’s brother, Steve): Supplied $983 million in components over three years, controlling 91.9% of chassis manufacturing.

• Compuware Technology (another brother, Bill): Major supplier of power supplies and critical server components.

These relationships obscure financial transparency, raising concerns about conflicts of interest and hidden cost structures. The overlap in supply chains, manufacturing and real estate holdings among these entities creates a tangled web that complicates clear financial reporting and accountability.

Operational and Competitive Pressures Mount

Beyond accounting concerns, SuperMicro struggles with hardware failures. A report by Hindenburg Research cited customer reports of:

• 40% GPU failure at Crusoe AI

• 17.5% server failure at GMI Cloud

• 10% hardware failure at Genesis Cloud

Major clients are noticing. Hindenburg said Tesla, Amazon and Digital Ocean have reduced or eliminated reliance on SuperMicro servers, citing reliability and service issues – SuperMicro has not responded to those charges. Meanwhile, Dell and Hewlett Packard Enterprise continue to gain ground, offering stable alternatives. SuperMicro’s limited customer service infrastructure is notorious in the tech sphere may have exacerbated dissatisfaction among enterprise clients seeking long-term reliability.

Compliance Risks and Export Violations

Super Micro Computer is also under scrutiny for potential export control violations. Hindenburg reported that exports of Super Micro's high-tech components to Russia have tripled since the invasion of Ukraine, suggesting possible breaches of U.S. export bans.

Hindenburg also says the company has also quietly maintained a joint venture with Chinese state-run entity Fiberhome, which has been implicated in human rights abuses. Since Fiberhome was added to the U.S. government's Entity List in 2020, Super Micro has sold approximately $196 million in components to “the Corporate Venture” which Hindenberg says is, in fact, a partnership with Fiberhome. 

These activities expose Super Micro to significant regulatory risks, including potential fines and operational restrictions. However, the U.S. Department of Justice has initiated an investigation into the company's accounting practices and potential export control violations, following a whistleblower lawsuit and the Hindenburg report.

The outcome of this investigation could have significant implications for Super Micro's operations and its standing with regulators.

The February Deadline: A Moment of Reckoning

SuperMicro’s financial restatement, due by February 25, 2025, will be closely watched. Failure to produce credible financials could lead to another Nasdaq delisting. Even if it meets the deadline, governance, operational reliability and compliance issues remain unresolved.

The company has yet to provide clear guidance on how it intends to address its history of financial misreporting. Investors and regulators will be scrutinizing whether the upcoming filing reflects genuine transparency or merely another layer of obfuscation. Given that the company’s previous auditor, Ernst & Young, resigned due to concerns over financial integrity, the credibility of the new audit process remains an open question.

Looking Ahead: AI, Hype and Reality

SuperMicro has benefited from AI-driven enthusiasm, but its fundamentals tell another story. A history of financial misreporting, questionable governance and operational challenges suggests that its AI-fueled success may be built on shaky ground. Established competitors offer more reliable alternatives, raising a key question: Is SuperMicro a true AI infrastructure leader, or is it just riding the wave before it crashes?

Long-term success in AI infrastructure depends on more than just hardware sales. Companies like Nvidia and Oracle (ORCL: NYSE) are integrating AI into broader cloud and data solutions, while SuperMicro remains reliant on volatile server sales. Without structural improvements in governance, transparency and better proof of product quality, the company risks being left behind as AI innovation moves beyond raw hardware into sophisticated enterprise solutions.

AMD: The AI Challenger's Rocky Road

Advanced Micro Devices (AMD: NYSE) delivered $7.7 billion in fourth-quarter revenue for 2024, an impressive 21% increase over last year. But it’s not enough. Beneath these strong numbers lies a company racing to catch up in artificial intelligence computing.

I've covered AMD since the early 2000s, tracking its evolution from semiconductor underdog to high-performance computing powerhouse. Today's challenge differs: establishing dominance in AI while fortifying its core businesses against competition from Nvidia.

CEO Lisa Su revealed in the Q4 earnings call that AMD's data center segment revenue grew 69% year-over-year to $3.9 billion, with MI300 AI accelerators contributing to over $5 billion in data center AI revenue for 2024. For context, during the same call, Su acknowledged that Nvidia's AI chip revenue exceeds $100 billion annually. AMD is building castles while Nvidia constructs kingdoms.

AMD's December 2024 analyst presentation highlighted the MI300X architecture's technical capabilities. With its 192GB high-bandwidth memory configuration, the chip demonstrates clear advantages in large language model inference, delivering 30% performance gains in specific workloads versus competitors. Su emphasized during earnings that the company's ROCm software ecosystem now supports over one million AI models out of the box, marking a significant advancement in their software capabilities.

The competitive landscape continues evolving. Meta Platforms (META: NASDAQ has deployed MI300X chips for inference on its 405B parameter Llama model, according to joint announcements, while Microsoft (MSFT: NASDAQ) uses them for GPT-4-based Copilot services. Yet Nvidia maintains commanding market leadership in AI acceleration.

And yet the recent DeepSeek announcement, as discussed in the earnings call Q&A, introduced fresh uncertainty about infrastructure requirements. While Su maintains that algorithmic innovations expand the total addressable market by making AI more accessible, analysts pressed for clarity on implications for future spending.

AMD's January 2024 announcement detailed the $4.9 billion acquisition of ZT Systems, adding roughly 1,000 design engineers and accelerating deployment of advanced data center solutions. Meanwhile, Su reported traditional business lines show vigor, with the client (personal computer) segment achieving record quarterly revenue of $2.3 billion, up 58% year-over-year, driven by Ryzen processor adoption. During earnings, AMD claimed over 70% share at major retailers during the holiday season, while announcing a new Dell partnership introducing AMD's first full portfolio of commercial PCs powered by Ryzen Pro processors.

Looking forward, Su projected strong double-digit percentage revenue growth for 2025, predicting the data center AI business will grow to "tens of billions" in annual revenue. The planned mid-2025 launch of the MI350 series, featuring AMD's CDNA 4 architecture, promises a 35x increase in AI compute performance compared to current offerings, according to technical specifications shared during the earnings call.

Near-term challenges persist. AMD's guidance indicates first-half 2025 data center GPU revenue will remain flat compared to second-half 2024. The recent partnership with Oracle and its promised $100 billion "Stargate" project suggests significant future AMD spending, though timing remains uncertain, based on statements from both companies.

AMD's trajectory demonstrates that excellence breeds expectations. While the company has evolved from has-been to contender in traditional computing, establishing similar standing in AI requires more than technical prowess. As indicated by Su’s comments and analyst questions during the earnings call, the coming quarters will determine whether AMD can convert its innovations into market leadership – a goal that has thus far remained just beyond reach.

Tweet O’ The Week

Epistrophy In The News

Billionaire Elon Musk’s hypocrisy taking tens of billions in government handouts while criticizing was good fodder for a hit on NewNation with Connell McBride (and fellow guest Mediate editor Colby Hall) on Thursday. Musk’s history in business (with Tesla and Twitter in particular) tells us a lot about what will happen with the Department of Government Efficentcy.

Earlier in the week (see the tweet above) I took a risk doing live earnings coverage, but once again Bloomberg BNN let me get my model updated and ready to talk about the success and simultaneous struggles with Applied Microdevices MI300 and MI350 GPU accelerators. I enjoyed getting a laugh out of anchor Andrew Bell as I checked my watch and talked Canadian beer while on the air.

Upcoming Events We’ll Be Following

Availability This Week

Feel free to reach out anytime this week via email or text if you need a quick response. I'm eager to dive deeper into these insights, and I'll be closely monitoring all the earnings reports mentioned above.

Our analysis is available in multiple formats for your convenience:

• Detailed written reports (access for clients)

• In-depth video breakdowns on YouTube

• Concise highlights on Instagram and TikTok

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