Even as major tech players like Nvidia bask in the AI spotlight, Super Micro Computer Inc. SMCI has quietly reaped significant rewards from its exposure to this booming technology. Since the start of 2023, coinciding with the launch of OpenAI’s ChatGPT and the early days of the AI revolution, SMCI shares have skyrocketed.
What Does Super Micro Do? Based in San Jose, California, Super Micro designs and manufactures high-performance server and storage solutions for demanding computational tasks. Notably, 71% of their revenue comes from the U.S., with Asia, Europe, and Others contributing 18%, 8%, and 3%, respectively.
Strong Financials And Optimistic Outlook: In late January, Super Micro reported fiscal-year 2024 Q2 revenue exceeding $3.66 billion, doubling compared to the previous year. Even more impressive, they raised their annual revenue guidance to a staggering $14.3 billion-$14.7 billion, reflecting strong demand for their optimized AI computer platforms.
“While we continue to win new partners, our current end customers continue to demand more of Supermicro's optimized AI computer platforms and rack-scale Total IT Solutions,” said Charles Liang, President and CEO of Super Micro.
See Also: Best Artificial Intelligence Stocks
Outperforming Competition: Super Micro’s stock has risen a staggering 183% year-to-date, significantly outperforming both Nvidia’s 46.6% gain and the Philadelphia Semiconductor Index‘s SOXX 8.5% gain. Interestingly, since 2023, Super Micro has even surpassed Nvidia’s growth by a margin of 482%.
Super Micro’s shares surpassed the $1,000 mark on Thursday but retreated the following day. The stock closed Friday’s session at $803.32, marking a 19.99% decline. The pullback followed cautious remarks from Wells Fargo’s semiconductor analyst, who initiated coverage with an “Equal-Weight” rating on the belief the stock already reflects the company’s impressive earnings potential.
Source: Benzinga
Since the start of 2023, Super Micro has outperformed the AI biggies by a mile. Nvidia has appreciated 397% since the start of 2023 compared to a steeper 879% gain for Super Micro.
Source: Benzinga
Thanks to the stellar rally since 2023, Super Micro graduated to being a large-cap (which by definition is over $10 billion in market-cap) in the middle of 2023.
Source: Y Chart
Last week, BofA Securities analyst Ruplu Bhattacharya initiated coverage of Super Micro Computer with a Buy rating and a price target of $1,040. The company is growing its backlog and expanding its capacity to support strong revenue growth, with 50% of revenue now “tied to accelerators like GPUs,” he said.
The analyst expects the AI server market to grow at a 50% compounded annual growth rate over the next three years, a marked acceleration from the average overall server market growth of 5.5% over the past 17 years. Super Micro’s revenue could outgrow the overall market, he added.
Fund manager Louis Navellier said, “Super Micro Computer (SMCI) is actually beating Nvidia this year in the wake of its outstanding results and guidance. So money is on the move and it is headed to more small and mid-capitalization companies that are prospering from explosive sales and earnings growth.”
There could be incremental upside for these companies, as about $8.8 trillion in cash is waiting on the sidelines, he said.
Returns From $1,000 Investment: Super Micro went public in March 2007 by selling 8 million shares at $8 per share. The stock opened the debut session at $8.85 and traded in a range of $8.66-$9.31 before settling at $8.76.
A $1,000 investment in Super Micro IPO would have fetched 125 shares in 2007 and the same shares are now worth $100,415. This translates to a return of 9,942%. In comparison, an investment of the same magnitude in the Fidelity Nasdaq Composite Index ETF ONEQ, an exchange-traded fund tracking the Nasdaq Composite Index would have fetched returns of 667%.
Image via Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
