Super Micro Computer (SMCI) stock price rose on Wednesday this week as investors moved back to artificial intelligence (AI) companies. SMCI jumped to a high of $46.6, its highest point since May 16, and 70% above its lowest level this year.
AI stocks are bouncing back
Super Micro Computer, also known as Supermicro, is a top company in the semiconductor and server industry. It manufactures products like the H14 servers, X13 Petascale All-Flash Systems, SuperBlade and MicroBlade, and BigTwin and FatTwin.
Its products are used by some of the biggest companies in the US and other countries. Notable companies that use its solutions are xAI, CoreWeave, NVIDIA, Apple, and Amazon.
Supermicro stock price rose this week as investors moved to AI stocks. NVIDIA, the biggest player in the industry, surged to a record high as investors predicted that its top clients, like Microsoft, Meta Platforms, and Google, were still investing in data centers.
The rally accelerated after Micron published strong financial results. Its revenue jumped to $9.3 billion from $6.8 billion in the same period last year. It reported a net income of over $1.89 billion.
Micron’s results provided further evidence that the AI bubble had not burst, as some analysts had predicted. It is a sign that other companies in the area are doing well.
Read more: Top 4 reasons why Supermicro’s bond offering is a positive for SMCI shares
Super Micro Computer business is doing well
The most recent results showed that Supermicro’s business was doing well but facing margin challenges. Its revenue rose by 19% to $4.6 billion, while its gross margins dropped by 590 basis points to 9.7%.
Supermicro’s growth was driven by its server and storage systems business, whose revenue rose by 21% to $4.49 billion. Its subsystems and accessories business deteriorated, with the revenue falling by 7%.
Wall Street analysts anticipate its upcoming earnings to show that its revenue rose by 10% to $5.8 billion, while its EPS fell from 62 cents to 44 cents. For the year, the estimate is that the revenue rose by 47% to $22.1 billion, followed by $29.6 billion in the next financial year.
Supermicro’s annual earnings per share are expected to drop to $2.08 and then rebound next year.
These earnings forecasts reflect the fact that Super Micro Computer downgraded its estimates in the last quarter. It lowered its revenue guidance from between $23.5 billion and $25 billion to between $21.8 billion and $22.6 billion. This lowered guidance explains why the stock retreated after earnings.
Wall Street analysts are largely neutral or bearish on the stock. Barclays analysts downgraded the stock from overweight to equal-weight, while JPMorgan slashed from overweight to neutral. The average SMCI stock price forecast among analysts is $42.9, higher than the current $46.6.
SMCI stock price technical analysis
The daily chart shows that the SMCI share price peaked at $66.40 earlier this year and then dropped to $46.60. It has moved slightly above the 50-day and 200-day moving averages, which is a bullish sign.
The stock has formed a head-and-shoulders pattern, a popular bearish reversal sign. Therefore, the stock may resume the downtrend soon, and possibly retest the support at $30.
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