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Vicor Idea Proposal (VICR)

Vicor Idea Proposal (VICR)
 

Are competitors taking design wins from Vicor with lower prices? What is the status of the data center transition to 48-volt power?

Report Available: October 18, 2019

 

Blueshift’s ongoing research found VICR struggling to meet investors’ high expectations as the data center market has cooled. The company’s recent difficulties are partly related to a drop-off in NVDA’s data center sales, which may persist.  While VICR’s power technology has earned rave reviews, its premium pricing may offer an opening for competitors like MPWR, which has recently claimed design wins in 48-volt environments. The pace of the data center shift to 48 volts will be an important factor for VICR’s growth hopes.

 

Observations

  1. After an extraordinary run-up, VICR has stumbled this year. Shares of the power component maker more than tripled during the first half of 2018 on an exploding order backlog and optimism about its advanced technology for powering next-generation data centers. The stock, however, has lost half its value since then. VICR said in late July that Q2 revenues plummeted 14.6% year-over-year and were down 3.6% sequentially. The report followed a disappointing Q1, when revenues fell almost 11% from the prior quarter. The company blamed reduced demand in the data center market for its advanced products and said the trade dispute with China was also choking order flow. Executives said they expected trends to turn more positive in the second half of the year.
  2. VICR’s fortunes are closely connected to those of NVDA, which is believed to be one of VICR’s biggest customers. NVDA has shown off prototypes of its latest data center GPUs that use VICR’s Power-on-Package technology. NVDA has hit some hard times in recent quarters as its once-skyrocketing data center sales have slowed. Blueshift’s Sept. 25 Tech Trends report said there appears to be a slowdown in data center project spending that is deeper than the soft data center sales trend that has moderated NVDA’s results over the past few quarters.
  3. Blueshift’s Oct. 4, 2018, report said that VICR has a huge opportunity in the data center as computing needs are becoming more intense and motherboards becoming more crowded. However, multiple sources said VICR could be vulnerable because its advanced components are double or triple the cost of competitors. The chief executive of competitor MPWR said during the company’s Q2 earnings call with analysts that MPWR has had “design wins” in 48-volt technology, in response to a question about high-end processors being used for artificial intelligence applications. VICR’s CEO has insisted that there is no viable competitive threat for its advanced power products and, indeed, Blueshift’s sources have said VICR’s Power-on-Package technology is unmatched for its power density and efficiency.
  4. In the medium and long term, VICR’s outlook is partly tied to how quickly data centers move from 12-volt power to 48 volts. GOOG is already bringing 48-volt power to its server motherboards in some of its data centers, but Blueshift’s sources have said the shift will be a gradual process that will start with only the biggest of the big hyperscale operators, such as AMZN, GOOG, FB and MSFT. It could be five to seven years before 48 volts is common across data centers. In the meantime, VICR has developed converters that allow for use of 48-volt servers without the need for a costly conversion of an entire data center’s power supply.
  5. Blueshift’s Feb. 8 report update found that sales of NVDA hardware that is powered by VICR technology was starting to gain some traction, though an explosive near-term spike was unlikely. Sources said the market for NVDA’s VICR-powered chips and server platforms is somewhat constrained for now, partly because of the high cost and the still-limited need for such powerful GPUs.

 

Are competitors like MPWR winning new business for 48-volt power components in data centers by undercutting VICR on price? What is the difference between MPWR’s and VICR’s solutions in terms of price and performance? Is the price difference enough to entice data centers, chip makers, and server OEMs to accept lesser alternatives? Where do the hyperscalers like MSFT stand in the shift to 48-volt power? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Data center operators, Chip designers and manufacturers, Engineers, and Industry specialists.  

 

Companies: Vicor Corp. (VICR), Alphabet Inc. (GOOG/GOOGL), Amazon.com Inc. (AMZN) Facebook Inc. (FB), Microsoft Corp. (MSFT) Monolithic Power Systems Inc. (MPWR)

 

Research Begins: September 30, 2019

 

 

To see other ideas Blueshift Research is currently working on, please click here.

 

 

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