SMCI Gains 46.2% YTD: Should You Buy the Stock for Its AI Drive?
Super Micro Computer SMCI shares have jumped 46.2% year to date, outpacing the Zacks Computer – Storage Devices industry, the broader technology sector and the S&P 500 index’s returns of 2.4%, 22.6% and 20%, respectively.
This impressive performance can be attributed to the company's solid position in artificial intelligence (AI) infrastructure market. SMCI boasts technology and product leadership in Generative AI training and inferencing.
The company’s diversified AI portfolio and strong AI integrations into its storage systems are positives. It is continuously witnessing solid demand for its server and storage solutions, thanks to the growing proliferation of Generative AI.
With such fundamental strength, Super Micro Computer has outperformed its peers NetApp NTAP and Pure Storage PSTG, which have rallied 39.2% and 39.6%, respectively, in the same period.
Year-to-Date Price Performance
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However, macroeconomic uncertainties and supply-chain challenges are headwinds. The company expects shipments to be constrained due to supply-chain bottlenecks for key new components for advanced platforms, which is a major negative. It is not seeing any significant boost in the shipment of NVIDIA's NVDA Blackwell Graphic Processing Unit (“GPU”) until March 2025, which is a severe concern.
Super Micro Computer's technical indicator suggests that further downside could be ahead. The stock has been trading below the 50-day moving average, a key technical level often used by traders to gauge short-term momentum.
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Are these near-term uncertainties and challenges a bother for investors, or does SMCI’s strong AI drive offer further growth opportunities?
Let us dig deeper to find out.
SMCI Rides on AI Drive
Super Micro Computer stands to capitalize on the current AI boom on the back of its diversified AI portfolio and strong AI integrations into its storage systems.
Given that AI is accelerating the need for liquid cooling, Super Micro Computer is investing heavily in high-quality, optimized Direct Liquid Cooling (DLC) solutions for high-end applications.
The company is building and optimizing Rack-Scale Plug and Play (PnP) solutions with the latest DLC liquid cooling technology in order to help customers achieve the best time-to-deployment and time-to-online with their AI solutions.
SMCI is experiencing the solid adoption of its Rack-Scale PnP Total AI solutions, which is contributing well to its server and storage revenues. It expects 5,000 rack capacity per month by the end of this year.
Super Micro Computer’s strength in its Datacenter Building Block Solutions is boosting its presence in the data center market. With the rapid deployment of large-scale AI infrastructure, datacenters worldwide are facing power shortages and cooling inefficiency challenges.
SMCI is making strong efforts to scale up its production in order to capitalize on AI prospects and drive its momentum among cloud service providers.
It has recently added three manufacturing facilities in Silicon Valley to support growth of AI and enterprise rack-scale liquid-cooled solutions and capitalize on the rising demand for liquid-cooled data centers.
Strong Partner Base Drives SMCI’s Growth
Super Micro Computer’s strong partner base, which includes the likes of major chipmakers — NVIDIA, Intel INTC and Advanced Micro Devices — remains noteworthy.
SMCI is benefiting from solid momentum across the NVIDIA GPU product lines. Many Super Micro Computer servers are explicitly designed for high-performance NVIDIA GPUs for AI processing, such as the very-high-density 4U-8GPU systems, the Intel CPU-based SYS-421GE-TNHR2-LCC and the AMD CPU-based AS -4125GS-TNHR2-LCC.
To further capitalize on the growing proliferation of AI, Super Micro Computer has deployed NVIDIA HGX H100 SuperCluster solutions to deliver enhanced experience to its customers.
Super Micro Computer also offers several products that support Intel’s Sapphire Rapids data center CPU and AMD’s Genoa data center CPU.
SMCI is now deepening its focus on developing generative AI and inference-optimized systems based on the next-generation NVIDIA H200, B100, B200, GH200 and GB200 GPUs, as well as Intel’s Gaudi2/3 and Advanced Micro Devices’ MI300X/A GPUs.
SMCI’s Long-Term Projections
Super Micro Computer’s technology and product leadership in the AI infrastructure market is expected to benefit its long-term prospects. It remains optimistic about its robust pipeline of new products, as well as existing products.
For fiscal 2025, the company expects net sales of $26-$30 billion, suggesting year-over-year growth between 74% and 101%. The Zacks Consensus Estimate for the same is pegged at $28.01 billion, indicating year-over-year growth of 87.5%.
The consensus mark for fiscal 2025 earnings is pegged at $3.35 per share, indicating a year-over-year rise of 51.6%. The figure has been unchanged over the past 30 days.
Attractive Valuation: A Silver Lining for SMCI
The SMCI stock is trading at a discount, with a forward 12-month Price/Sales of 0.08X compared with the industry’s 1.9X and lower than the median of 0.18X, reflecting a good opportunity for investors.
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Conclusion
Super Micro Computer’s long-term prospects are likely to benefit from its significant investments in production, operations, management software, AI portfolio, cloud features and customer service, which are expected to bolster its customer base in the days ahead.
Its attractive valuation presents a compelling case for buying the GRPN stock at its current levels.
Super Micro Computer currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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