Ultramicrocomputer (SMCI.US) won the DataVolt order, but Goldman Sachs bucked the trend and reaffirmed the “sell” rating

The Zhitong Finance App learned that on Wednesday, Goldman Sachs analyst Michael Ng maintained a “sell” rating for ultra-microcomputers (SMCI.US), with a target price of $24, although Ultramicrocomputer recently announced that it has signed a $20 billion multi-year agreement with DataVolt focusing on GPU platforms and rack systems, which will be deployed at DataVolt's data centers in Saudi Arabia and the US. The company showed strong growth momentum, with revenue growth of 82.49% over the past 12 months, despite a relatively low gross margin of only 11.27%.

The deal relates to DataVolt's investment in NEOM's new data center campus, which is expected to be put into operation in 2028, at a development cost of over $5 billion and a capacity of 300 MW. Although the details of the agreement, including whether it is a single-source or multi-source contract, its profit margin, exact timing, and whether it is a Memorandum of Understanding (MoU) or a binding contract, remain undisclosed, the agreement is seen as a positive development for ultra-microcomputers. Thanks to this, ultra-microcomputer shares closed up 15.71% to $45 on Wednesday.

Goldman Sachs acknowledged the potential impact of the deal and said it could mark an expansion of AI infrastructure that will surpass current major players, including a wider range of customers. If the deal lasts for five years and has a profit margin of 5%, of which $20 billion is all IT hardware revenue, then this could mean that ultra-micro computers have annual revenue of $4 billion and EBIT of $200 million. Despite this, Goldman Sachs maintained a “sell” rating.

Supercomputer announced an important $20 billion partnership with DataVolt, which is expected to increase the company's visibility and may lead to an increase in guidance. This collaboration highlights the strategic direction of ultra-microcomputers and is expected to have a positive impact on its operations and financial results over the next few years. Additionally, Ultramix has begun shipping servers equipped with AMD (AMD.US)'s latest EPYC 4005 series processors, which are designed to increase data center computing density and reduce total cost of ownership. The move is part of the company's ongoing innovation efforts to provide powerful and cost-effective solutions for cloud service providers and enterprises.

However, other investment institutions are optimistic about the boost this deal will bring to ultra-microcomputers. Raymond James maintains the ultra-micro computer's “plus” rating with a target price of $41, citing the company's leadership in artificial intelligence infrastructure and strategic initiatives, such as expanding the US manufacturing industry and adopting Nvidia's (NVDA.US) Blackwell platform. At the same time, Needham restored its “buy” rating and a target price of $39 for ultra-microcomputers, highlighting the positioning of ultra-microcomputers in the artificial intelligence and high-performance computing market; despite recent performance challenges, Needham is confident about the company's prospects because management has been strengthened and filing risks have been resolved.

Rosenblatt Securities lowered the ultra-small price target from $55 to $50, maintaining the buy rating. This adjustment reflects caution due to customer expectations of delays in shipping Nvidia's upcoming Blackwell GPU platform. Despite these challenges, Rosenblatt remains optimistic about ultra-slight growth due to strong demand for new systems and revenue expectations for the next few quarters.