What’s Happening With Super Micro Stock?

May 14th, 2025 by Trefis Team
SMCI: Super Micro Computer logo
SMCI
Super Micro Computer

Super Micro Computer stock (NASDAQ:SMCI) surged 16% on Tuesday after Raymond James initiated coverage with an Outperform rating and a $41 price target. While some of the optimism is warranted, given Super Micro’s role in the generative AI space and its strong recent growth, investors should tread carefully with the stock for a couple of reasons.

Strong Ties To Gen-AI, Reasonable Valuation

Super Micro’s server offerings are closely tied to Nvidia’s GPU ecosystem. With Nvidia ramping up production of its new Blackwell chips, demand for SMCI’s AI-optimized server platforms could see an uptick.  Raymond James estimates that Super Micro holds about 9% of the $145 billion AI platform market. The company is also emerging as a key player in direct-liquid-cooled (DLC) server technology, critical for managing compute-intensive AI workloads. Super Micro’s Valuation is another bright spot. The stock trades at roughly 13x estimated FY’26 earnings, which is well below the S&P 500’s forward multiple of over 20x. The discount appears compelling, especially given Super Micro’s revenues grew by 74.5% annually over the past three years.

Weak Recent Earnings,  Governance Issues

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 There are several concerns as well. Preliminary results for its March quarter significantly underperformed expectations. The server manufacturer is now expecting revenue between $4.5 billion and $4.6 billion, a considerable drop from its previous guidance of $5 billion to $6 billion. Earnings per share are also anticipated to be well below predictions, ranging from $0.29 to $0.31 per share. Super Micro has blamed the miss on “delayed customer platform decisions,” which resulted in some orders being postponed until the next quarter. However, the extent of the shortfall does raise apprehensions about broader demand trends and might even indicate a potential loss of market share for Super Micro Computer to competitors such as Dell Technologies.

Then there are corporate governance issues. Super Micro has faced significant controversy over the past year, including allegations of accounting irregularities, delays in SEC filings, and scrutiny from short-sellers. Although some of these issues have eased in the last few months, following the company’s recent filing of its financial statements, the latest earnings miss, coupled with a spotty track record of corporate governance, suggests that investors may need to proceed with caution with SMCI stock.

Investing in a single stock like SMCI can be risky. On the other hand, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming 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.

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