While chip darling Nvidia made headlines for its impressive stock performance buoyed by AI excitement, an obscure German company quietly saw its shares almost double in 2024. Supercomputing systems maker ParTec surged to over 95%. for the reason that starting of the yr, when investors began to note its potential. Although the corporate has been listed on the Frankfurt Stock Exchange for lower than a yr, its roots date back to 1999, when it was established as a spin-off from the Karlsruhe Institute of Technology in Germany. The small company, which had sales of 52 million euros ($56 million) in the primary half of last yr, has signed a contract value 300 million euros ($327 million) to construct the continent’s first ultra-powerful supercomputer. The Jupiter system is anticipated to give you the option to perform a minimum of one quintillion – or a billion billion – calculations per second. JY0-DE 1Y line How do investors perceive it? Hendrik Leber, fund manager at Acatis Datini Valueflex Fonds, owns shares of ParTec and says he sees the corporate as a “very clear” investment opportunity. “Europe desires to spend several billion on supercomputers over the subsequent few years, and it desires to spend it locally within the EU. ParTec has the technology to do this and will likely be well prepared to take part in public tenders,” added Leber. What exactly does ParTec do? ParTec, with 60 to 70 employees, provides software systems needed to configure supercomputers, mainly for research purposes. “Their main product is middleware and maybe quantum computers in the future,” senior equity analyst Miguel Lago Mascato of equity research firm Montega told CNBC Pro. Lago Mascato expects its shares to rise another 21% to €130 over the next 12 months. While competitors such as Hewlett Packard may also bid on supercomputing projects, Lago Mascato said the ParTec middleware gives them a “unique advantage.” Patents and royalties Earlier this year, independent auditors valued ParTec’s 150 supercomputer construction and design patents at €767 million, which the company expects will “significantly strengthen” its capital base. However, some are skeptical whether the company will be able to monetize its patent portfolio. “At this point, our visibility that ParTec will achieve royalty income from its patent portfolio in the near future is very low,” Lago Mascato stated bluntly. However, fund manager Leber dismissed concerns about the lack of royalty payments and pointed to the €300 million Jupiter contract as an example of real cash flow. “The orders are very real and the economic gains are also very real,” Leber said. “I am not concerned about synthetic valuations of patent portfolios. I see very realistic data centers and that’s where the revenues and profits come from.” Liquidity Risk Another risk factor that investors should be aware of for ParTec is the limited liquidity of its shares. Less than 13% of the company’s shares are in free circulation. Leber noted that due to low trading volumes, even listing shares worth €2 million took about a month. This lack of liquidity means that the share price does not always effectively reflect the underlying value of the company. Future AI Opportunities ParTec sees significant opportunities beyond traditional supercomputers to provide systems tailored to training large AI models. Bernhard Frohwitter, CEO of ParTec, told CNBC Pro that there is a strong demand for context-aware systems that go beyond language models. Large language models like those behind ChatGPT generate text, images and videos by predicting the next word or pixel in the sequence. But Frohwitter said companies are demanding AI models that instead require “internal logic” in physics, mathematics and mechanics. Frohwitter added that ParTec is already “under enormous pressure from institutions and even governments to construct such machines” capable of training basic artificial intelligence models. “We’re in the midst of. In a number of months, we are going to offer machines based on artificial intelligence that can give you the option to coach together, manage data, reason, and so forth,” he said.
Excluding Nvidia, German supercomputing stocks are up 95% this yr.
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