Taiwanese server ODMs will begin shipping AI servers at the end of the third quarter and are anticipating significant growth in 2024, according to industry sources. Microsoft and Google have stated they will continue increasing investments in data center hardware and equipment, which is expected to drive growth for Taiwanese server supply chain players.
Microsoft has invested big in OpenAI and is actively embracing generative AI. After announcing in February that it will release a new version of its Bing search engine, Microsoft launched a series of AI services and just announced subscription fees for its Microsoft 365 Copilot AI tool. Fees from Copilot are expected to contribute to revenue in the second half of Microsoft's next fiscal year.
Microsoft recently released its fiscal fourth quarter 2023 results, revealing that revenue from Microsoft Cloud reached US$110 billion during the period, while revenue from its public cloud service Azure accounted for more than 50% of the total revenue for the first time. Azure's revenue increased 26% on year. Microsoft estimates that Azure's on-year revenue growth in the next quarter will fall to 24%.
During an earnings call, Microsoft CEO Satya Nadella pointed out that customers added new cloud services during the pandemic, which slowed post-pandemic. However, he expects to see new project starts in the next few quarters. In the future, Nadella anticipates AI will drive even more cloud service opportunities.
With customers expected to start up new projects, server supply chain players are expected to benefit. Microsoft also stated it will continue to increase its capital expenditure for data centers, CPUs, GPUs, and network equipment.
Microsoft's capex in the previous quarter reached US$10.7 billion. Microsoft CFO Amy Hood said capex would increase quarter by quarter in the 2024 fiscal year to support demand for cloud services and AI infrastructure.
Google's parent company Alphabet recently released its second-quarter 2023 financial report, revealing that Google Cloud revenue increased 28% on year to US$8 billion. Alphabet CEO Sundar Pichai said that AI will bring new cross-selling opportunities for Google Cloud in the future.
In the second half of the 2023 fiscal year, Alphabet will increase its capex for technology equipment infrastructure. In the 2024 fiscal year, it will continue to increase its capex, mainly due to the opportunities brought on by AI. Investments will go toward GPUs, TPUs, and data centers.
Aside from Supermicro, which has already shipped AI servers equipped with Nvidia's H100 GPU, Quanta Computer, Wiwynn, and Inventec all expect to begin mass production of AI servers at the end of the third quarter, according to supply chain sources. The servers will mainly be supplied to US-based cloud service providers.
Supply chain sources pointed out that initial shipments of AI servers have been small, but expect to see good follow-up growth momentum driven by increased capital expenditures from cloud service providers. Server shipment momentum is estimated to increase in the second quarter of 2024.
Article translated by Eifeh Strom
