Why Super Micro Stock Has Gained 60% This Year

Server maker Super Micro Computer stock (NASDAQ: SMCI) has seen a surge over 2025, rising by almost 60% year-to-date. The rally comes after the stock experienced considerable volatility in 2024, surging to over $114 per share earlier in the year before crashing by over 80% at one point due to multiple questions relating to its accounting, corporate governance, and delayed filing of its financial results. Here’s a closer look at the the accounting issues that have impacted SMCI stock. So what’s been driving SMCI stock higher in recent weeks?

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Strong Demand Outlook

Last Tuesday, the server vendor reported a weaker than expected set of preliminary results (the company is on a June fiscal year) for Q2 (December ’24), and also provided disappointing guidance for FY’25 (June ’25). However, the company’s FY’26 revenue guidance (ending June 2026) was much stronger than expected, coming in at about $40 billion, which marks an increase of as much as 70% compared to FY’25. Moreover, the company’s CEO indicated that this guidance may even prove conservative. The growth will likely be driven by continued investments into AI servers, with Nvidia slated to ramp up production of its latest Blackwell GPUs which could in turn scale up demand for SMCI’s servers which are used to deploy the latest GPUs.

SMCI has also been focusing on gaining market share in the direct-liquid cooled (DLC) server space. DLC is well suited for cooling servers running energy intensive AI workloads and the technology is expected to be used in over 30% of new data centers in the next year. This is also helping to boost Super Micro’s presence in the AI server space. Apart from this, Super Micro has apparently priced its AI servers at a discount compared to its rivals helping it gain share in the market, although this is impacting gross margins to an extent.

Steps Towards Regaining Compliance 

Along with its preliminary Q2 update, Super Micro confirmed its plan to submit its delayed 10-K report to the Securities and Exchange Commission by Feb. 25 was on track. If the company’s 10-K report does not include significant revisions to sales and earnings for the previously reported fiscal year, it is likely that the company could see more confidence from investors.  SMCI has indicated a few months ago that it conducted an internal probe led by a special board committee, along with attorneys, and a forensic accounting firm and found no evidence of fraud or misconduct by management.

SMCI is one of a handful of stocks that have increased their value in each of the last 4 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 39% in 2021, 87% in 2022, 246% in 2023, and 7% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could SMCI face a similar situation as it did in 2024 and underperform the S&P over the next 12 months – or will it see a strong jump?

Even post the big rally this year, SMCI stock trades at just about 18x consensus 2025 earnings. This is reasonable, given the company’s high growth rates and exposure to the hot AI server market. That said, investors need to be cautious about the company’s track record with corporate governance as these issues could hinder its long-term ability to deliver shareholder value.

[1] Returns as of 2/16/2025
[2] Cumulative total returns since the end of 2016

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