Unless you’ve been living under a rock, you’ve probably heard about the artificial intelligence (AI) buzz that’s been sweeping the tech world. Well, it turns out that Super Micro Computer (SMCI) is one of the hottest players in the game right now. SMCI manufactures the high-powered servers and systems required to run cutting-edge AI workloads. The server maker, now valued at $56 billion, was even added to the prestigious S&P 500 Index ($SPX) in March, which means it’s now appearing in some high-profile portfolios via tracking funds and indices.
Of course, being a growth-fueled tech stock, SMCI has had its fair share of ups and downs. But overall, the trend has been mostly higher; SMCI’s stock price is up 870% over the past year, and 264% year-to-date. The stock’s outperformance reflects its strong position in the AI infrastructure market, although – amid some heightened volatility in the past month – SMCI is now down more than 15% from its March 1 all-time high.
Now, I know what you might be thinking. With all those crazy price swings – not to mention chatter about an “AI bubble” – is it too late to take part in the SMCI rally? Well, according to quite a few Wall Street analysts, the answer is a resounding “yes!” So, what makes SMCI such a hot pick among these experts? Here are three of the key reasons analysts think Super Micro stock can keep outperforming:
Groundbreaking Competitive Edge
Super Micro Computer has already carved out a solid spot for itself in the competitive tech world, and a big reason for that is its incredible speed to market. The folks at Barclays have even called this SMCI’s “strongest moat,” which means it’s their biggest advantage over the AI server competition.
With leading AI chip companies like NVIDIA (NVDA) now launching new products every year instead of every two years like they used to, Barclays thinks SMCI is well-positioned to flex this muscle. And it’s not just NVIDIA – other big players like Advanced Micro Devices (AMD) and Intel (INTC) are also speeding up their product development. The brokerage says SMCI’s ability to immediately match these new silicon products with a list of ready server products sets it apart from its competitors, who often face much longer development cycles.
And this speed to market is not just about having server products ready to go; it’s about the comprehensive support ecosystem SMCI provides. Upon the announcement of a new silicon product by NVDA, AMD, or INTC, SMCI offers design assistance – ensuring that its server products are not just compatible, but optimized, for these new technologies.
As businesses across industries look to leverage the latest tech in AI, big data, and cloud computing, the demand for high-performance computing solutions is going through the roof. SMCI’s ability to quickly bring to market server solutions that are tailored to the latest chip technologies gives it a real competitive edge. It means SMCI’s customers can start using new technologies faster, which gives them a leg up in their own markets.
Barclays rates SMCI at “Overweight,” with a price target of $961.
Explosive AI Server Market Expansion
The AI server market is undergoing explosive growth, and that’s one big reason why SMCI is getting so much attention. According to industry forecasts, the AI server market is expected to balloon from $12.34 billion in 2023 to a whopping $50.65 billion by 2029. As an established leader in the market, Super Micro should be particularly well-positioned to tap into this booming growth.
In other words, as businesses rely more on AI for things like operational efficiency and data analysis, the demand for SMCI’s specialized server solutions is expected to skyrocket. And it’s not just about having more servers, but having servers that can handle really complex AI applications.
Unveiling Super Micro: A Game-Changer in the AI Server Market
The Potential Growth in the AI Server Market
Recently, JPMorgan recognized the impressive speed to market of Super Micro Computer Inc. (SMCI). Analysts at JPMorgan highlighted the expansion in the underlying AI server market as the fuel for future growth for SMCI.
Accelerating Earnings Growth
With revenue figures already on a solid trajectory, SMCI reported revenue of $3.66 billion in the second-quarter earnings report for fiscal 2024, released on Jan. 29. This marks a substantial 103% increase from the previous year and surpassed the expected $2.80 billion. Analysts anticipate further revenue growth to $3.94 billion in the upcoming quarter.
Noteworthy is the accelerated earnings per share (EPS) growth SMCI showcased. In Q2 2024, the company reported adjusted EPS of $5.59, exceeding analysts’ expectations and representing a remarkable 106.3% surge from the previous year. This robust EPS growth indicates a balance of revenue expansion and effective cost management, translating to increased profitability.
Analysts foresee a positive outlook, with an 86% surge in EPS to $21.97 for the full fiscal year 2024, and continued growth to $30.59 projected for fiscal 2025.
The Bottom Line on SMCI Stock
Analysts at Argus, with a Street-high price target of $1,350 for SMCI, have praised the company’s ability to convert top-line growth into bottom-line results. Comparing SMCI to industry giants like Apple, Amazon, and Nvidia, analysts commend SMCI for outpacing revenue growth over costs. Argus rates SMCI a “Buy.”
In sum, SMCI’s unmatched speed to market, expectations of explosive growth in the AI server market, and its rapidly accelerating earnings paint a compelling picture for the stock at its current levels. Positioned as a pivotal player in the high-performance computing landscape, SMCI presents a promising opportunity to leverage the tide of AI innovation.
Overall, of the 12 analysts tracking Super Micro, the stock has been deemed a “Moderate Buy” with a mean price target of $868.64. While this sits at a discount to current prices, the Street-high target of $1,350 reflects a premium of 30%. Among these analysts, 8 rate the stock a “Strong Buy,” with only 3 “Holds” and 1 “Strong Sell.”