2026-01-18XQuote

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Wistron, a leading AI server assembler, reported its FY25 financial results. Gross margin (GM) for FY25 and 4Q25 came in at 6.1% and 5.6%, respectively, both below street consensus of 6.5% and 6.8%. 1. These results validate my earlier view on the structural impact of AI server design trends on assembler profitability. GM was also pressured by the product transition (GB200 NVL72 → GB300 NVL72). 2. 2026 assembly GM positives to watch: 1) ~200% YoY shipment growth for the GB NVL72 series in 1H26, where scale should be supportive; and 2) Mass production of new ASIC AI servers with higher assembly GM starting in 2H26. 3. On the downside for 2026 assembly GM: Beyond the aforementioned Nvidia AI server design trends, rising component prices will also dilute reported GM. 4. Wistron and its largest AI server customer, Dell, rallied together last September on buy-side expectations of Wistron’s market share gains and GM expansion (from ~5.5–6% to 6%+). While Wistron’s shares have remained elevated in recent months following an earlier rerating, it is worth noting that Dell’s share price has retraced to its September starting point amid profitability/GM concerns, following sell-on-news after a sharp backlog increase.

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AI server assembler Wiwynn’s recent 4Q25 gross margin miss (7.2% vs. consensus estimates of 8–8.3%) has triggered a share price correction and reignited investor concerns. While rising component costs can mechanically dilute reported gross margins, it is more critical to examine the underlying profitability trends in server assembly through the lens of structural changes in AI server design. Nvidia continues to increase the level of design integration in AI servers to boost token output per unit of space and power, addressing the constraints of limited data-center space and scarce electricity supply. Highly integrated designs also help improve manufacturing efficiency, which in turn benefits supply-chain management and reduces maintenance costs. VR200 NVL72 is a representative example of this high-integration approach. Based on my industry surveys, its compute tray adopts a cable-less design, resulting in an ~40% reduction in the number of component items vs. GB300 NVL72. However, higher integration also comes with a greater share of Nvidia-specified components and a shrinking scope for customization, both of which are unfavorable to assembler profitability. My industry survey indicates that components classified as “customization not allowed” in the VR200 NVL72 compute tray have risen to 20–22%, well above the 5–7% level seen in GB300 NVL72. Moreover, VR200 NVL72 has directly eliminated "ODM-designed" component items entirely. In fact, this trend toward higher integration began with GB300 NVL72. My industry checks suggest that white-box GB200 NVL72 assembly gross margins were still around 18–20% in 1Q25, but by 1Q26, white-box GB300 NVL72 margins are expected to decline sharply to 6–8%. Importantly, this trend is likely to persist. Looking ahead, Kyber rack designs are expected to feature an even higher degree of integration and face greater margin pressure than the current Oberon generation. Assemblers will not remain passive in the face of these challenges. Beyond straightforward improvements in manufacturing efficiency, there are currently three practical approaches to addressing margin pressure in the server business, although their effectiveness remains to be seen: 1. optimizing product mix by increasing exposure to higher-margin ASIC AI servers; 2. securing NPI opportunities to enhance bargaining power with customers during the early stages of mass production; and 3. pursuing vertical integration strategies—ranging from qualifying in-house or group-affiliated server components through Nvidia validation, to expanding the business scope toward providing full data-center build-out solutions.
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