As Super Micro Computer faces the risk of being delisted, another small-cap stock related to the AI datacenter business, TSS, recently successfully listed on nasdaq, providing investors with a point of interest.

TSS Inc (TSSI.O) is a systems integrator specializing in procuring and configuring equipment for datacenters, closely related to Dell (DELL.N). TSS is located in Round Rock, Texas, less than 5 miles from Dell's headquarters. Customers typically first purchase servers from Dell, and then turn to TSS for datacenter configuration support.

The importance of Dell to TSS is evident: in 2023, 96% of TSS's revenue came from Dell. This close cooperation allows TSS to directly benefit from the rapid growth of Dell's datacenter business. In the last quarter, Dell's server business revenue increased by 38%, while its PC business shrank by 4% during the same period.

After TSS announced its transition from the otc market to nasdaq, its stock price soared 22% on November 15. This news led the market to speculate that it might enter the Russell 2000 index in the future. Meanwhile, bolstered by Dell's datacenter sales, TSS's revenue in the third quarter surged 698% year-on-year, reaching 70.1 million dollars, and its eps rose from 1 cent last year to 10 cents.

However, despite significant increases of 179% in revenue and gross profit, the gross margin shrank to 11%, similar to recent quarterly performance of super micro computer (SMCI.O). This decline in profitability may raise concerns among some investors, leading to a 33% drop in its stock price during after-hours trading on November 16.

TSS's biggest risk lies in its heavy dependence on Dell. Losing this business would significantly reduce its revenue, and the company could even face a survival crisis. Additionally, TSS needs to maintain cash flow by selling accounts receivable. In 2023, TSS sold 0.137 billion dollars in accounts receivable and paid 2 million dollars in interest. Although this operation alleviated cash flow pressures, it also highlighted its deep reliance on Dell.

On the other hand, TSS also has growth potential. It is expanding its business scale and relocating to a new site to meet the growing electrical utilities demand. This year, Dell also provided TSS with 1.7 million dollars in support for its capital expansion. As Super Micro's accounting issues are scrutinized more closely, customers like nvidia (NVDA.O) may be more inclined to choose Dell as a reliable partner for AI business, which could bring more opportunities for TSS.

In addition, if TSS can attract a second significant client, its growth will accelerate further. However, according to TSS CEO Darryll Dewan, this global strategy still needs to be executed within the limits allowed by Dell.

TSS, through close collaboration with Dell and the rapid growth of its datacenter business, has demonstrated its potential to become a strong player in the AI field. However, heavy reliance on a single client and volatility in profitability also bring uncertainties for its future development. For investors who are bullish on the AI sector, TSS's prospects are worth paying attention to, but the risks should not be overlooked.