OIL SHEIKHS NOW WANT AI CHIPS

(SMCI), (NVDA), (AMD), (QCOM), (INTC), (HPE), (DELL), (LNVGY), (MSFT), (GOOGL), (AMZN)

Last week, I was scrolling through earnings reports in my hotel room after a long day at an AI investment conference in Austin when Super Micro Computer (SMCI) caught my eye.

Then yesterday, the breaking news hit my inbox – SMCI had just announced a staggering $20 billion partnership with DataVolt. I nearly spilled my bourbon on the keyboard.

This deal represents a figure roughly equal to their entire trailing revenue – yet the stock was barely moving. Something wasn’t adding up.

After three decades in the markets, I’ve developed a sixth sense for disconnects between company fundamentals and stock prices. This one was screaming at me.

I pulled up the chart on my laptop. SMCI was trading around $45, down from $101 just months earlier. The disconnect was staggering. 

Here we have a company sitting at the absolute epicenter of the AI revolution, signing massive deals, yet trading at a forward P/E that would make value investors blush.

What makes this DataVolt deal particularly important is the timing. 

I just got off the phone with a contact at one of the major cloud providers who told me that Trump’s Middle East tour this week has resulted in $600 billion worth of commitments from Saudi Arabia, including massive purchases of chips from Nvidia (NVDA), AMD (AMD), and Qualcomm (QCOM).

On top of these, the U.S. has struck a preliminary agreement with the UAE to allow it to import 500,000 of Nvidia’s advanced AI chips annually through 2027 or potentially 2030. 

The deal also requires that for every data center G42 (a UAE AI startup) builds in the UAE, it must build a similar one in the U.S.

Connect these dots: More imported Nvidia chips means more servers built by SMCI. This isn’t coincidental – it’s causal.

After spending the day digging into the numbers, I’m convinced we’re looking at one of the most compelling AI infrastructure plays of 2025 – and Wall Street is completely missing it.

SMCI is in the unglamorous but absolutely critical business of building the specialized server systems that power AI applications. 

While everyone obsesses over Nvidia’s chips, someone has to build the complex cooling systems, power supplies, and server architectures that make those chips functional in data centers. That’s SMCI’s bread and butter, and business is absolutely booming.

Let me share some numbers that should wake you up. SMCI’s revenue has been growing exponentially over the past few years as AI adoption accelerates. The company’s management expects to hit $40 billion in revenue by FY2026. For context, their FY2021 revenue was just $3.6 billion. We’re talking about a potential tenfold increase in just six years.

Over dinner with a data center architect in San Francisco last month, he told me, “Everyone’s focused on the chips, but the real bottleneck is going to be building enough specialized systems to house them. The typical air-cooled servers we’ve been using for years just can’t handle the heat from these AI accelerators.”

That’s precisely the problem SMCI is solving. They’re among the first to deliver optimized liquid cooling solutions targeting 30%+ of global new data center deployments. 

They’ve pioneered a Data Center Building Block Systems architecture that enables AI systems to achieve what industry insiders call TTD, TTO and TCO (time to deploy, time to operation, and total cost of ownership) advantages that are critical in this industry.

Let’s talk valuation, because this is where it gets truly absurd. SMCI trades at a current P/E below 20, which is already low for a company growing this aggressively. 

What’s more stunning is that its P/E is forecast to drop below 10 over the next few years. When I ran a discounted cash flow model with conservative assumptions, I got a fair value of $83.39 per share – representing an 87% upside from current levels.

The company isn’t sitting idle waiting for orders either. They’re ramping up R&D aggressively, with spending now reaching $580.8 million to maintain their technological edge. 

They’re working closely with all the major AI chip companies – Nvidia, AMD, and Intel (INTC) – to ensure their systems are optimized for the latest accelerators like Nvidia’s Blackwell platform.

Now, I should mention that investing in SMCI isn’t without risks. This stock is extremely volatile – over the last year, it’s traded between $17.25 and $101.40. It’s also frequently targeted by short sellers, with current short interest at 17.4%. 

The company operates in a fiercely competitive market alongside heavyweights like Hewlett Packard (HPE), Dell (DELL), and Lenovo (LNVGY).

But here’s why I believe the risk-reward ratio is so favorable: the market is completely underestimating the sheer scale of AI infrastructure spending that’s about to occur. 

According to my industry contact, the largest cloud providers and AI companies – Microsoft (MSFT), Google (GOOGL), and Amazon (AMZN) – are projected to spend over $1 trillion on AI infrastructure over the next five years. 

All three demonstrated robust revenue growth in their cloud businesses this quarter and explicitly stated their plans to invest heavily in AI infrastructure in 2025. SMCI is perfectly positioned to capture a significant share of this spending.

With Trump back in office and aggressively courting Middle Eastern investments, we’re seeing a new wave of tech diplomacy that will accelerate AI adoption globally. When Saudi princes start writing billion-dollar checks for AI chips, you’d better own the companies building the infrastructure to house them.

Maybe it’s time I finally accept that invitation from my long-time Concierge subscriber to join him for dinner at his private club in the Burj Khalifa. I’d love to watch firsthand as the desert blooms with data centers. Just remember to pack your SMCI shares alongside your sunscreen.