While chip darling Nvidia has made headlines for its impressive stock performance, driven by excitement around artificial intelligence, a quietly under-the-radar German company has seen its shares nearly double in 2024. ParTec, a developer of supercomputing systems, rose by more From 95%. % year-to-date as investors begin to notice its potential. While the company has been listed on the Frankfurt Stock Exchange for less than a year, its roots go back to 1999, when it was founded as a spin-off of the Karlsruhe Institute of Technology in Germany. The small company, which had total sales of €52 million ($56 million) in the first half of last year, has been awarded a €300 million ($327 million) contract to build the continent's first powerful supercomputer. It is expected to be able to perform at least a quintillion – or a billion billion – calculations per second. JY0-DE 1Y Line How do investors take it? Hendrik Lepper, fund manager at Acatis Datini Valueflex Fonds, owns ParTec shares and says he sees the company as a “very clear” investment opportunity. “Europe wants to spend a few billion dollars on supercomputing in the next couple of years, and they want to spend it locally in the EU. ParTec has the technology to do that and will be well placed for these public tenders,” Lieber added. . What exactly does ParTec do? ParTec, which has 60 to 70 employees, provides the software systems needed to set up supercomputers, especially for research purposes. “Their main product is middleware, and perhaps quantum computers in the future,” Miguel Lago Mascato, senior equity analyst from equity research firm Montiga, told CNBC Pro. Lago Mascato expects the company's shares to rise another 21% to €130 over the next 12 months. While competitors such as Hewlett-Packard can also bid on supercomputing projects, Lago Mascato said ParTec's middleware gives them a “unique selling point.” Patents and royalties Earlier this year, independent auditors valued ParTec's 150 patents for building and designing supercomputers at €767 million, which the company expects to “significantly strengthen” its stock base. However, some question the company's ability to monetize its patent portfolio. “At this time, our visibility for ParTec to generate licensing income from their patent portfolio in the near future is very low,” Lago Mascato said bluntly. However, fund manager Lipper dismissed concerns about shortfalls in royalties and pointed to the €300 million Jupiter contract as an example of real cash flow. “The demands are very real and the economic profits are very real as well,” Lieber said. “I don't care about synthetic valuations of patent portfolios. I see very real computing centers, and that's where the revenues and profits come from.” Liquidity Risk Another risk factor that investors should be aware of with ParTec is the limited liquidity in its shares. Less than 13% of the company's shares are freely offered. Given the small trading volume, Lepper noted that even a €2 million IPO took about a month to complete. This lack of liquidity means that the share price may not always reflect the underlying value of the company efficiently. Future Opportunities with AI ParTec sees significant opportunities beyond traditional supercomputing by providing systems specifically designed for training large AI models. Bernhard Frohwetter, CEO of ParTec, told CNBC Pro that there is a huge demand for systems with contextual understanding that goes beyond just language models. Large language models, such as those in ChatGPT, generate text, images, and videos by predicting the next word or pixel in a sequence. However, Frohwetter said companies are demanding AI models that require “internal logic” in physics, mathematics and mechanics instead. ParTec is already facing “enormous pressure from institutions, and even governments, to build such machines” capable of training these basic AI models, Frohwetter added. “We are in the process. In a few months, we will introduce AI machines that can do training, data management, reasoning and all of that together,” he said.
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