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Super Micro Computer (SMCI) saw its shares spike for the second straight session after the company revealed that it was increasing “full production availability of its end-to-end AI data center Building Block Solutions accelerated by the NVIDIA Blackwell platform.” This comes on the back of a rally after the company said it would give a second-quarter update after markets close next Tuesday, Feb. 11.
Mired in troubles due to a scathing report by the now-defunct short-seller Hindenburg Research, the resignation of its auditor and the looming threat of its delisting from Nasdaq due to the delayed filing of its annual report and other required financial statements, is SMCI stock (down nearly 50% over the past year) finally out of trouble? Let's try and find out.
4 Reasons to Buy SMCI Stock
Market Growth: SMCI is a leading provider of high-performance server and storage solutions for data centers, enterprise information technology, cloud computing, and AI-driven applications. The AI server market is expected to grow at an 18% CAGR, reaching $177.4 billion by 2032, while data center storage capacity is projected to more than double by 2027.
The rapid rise of large-scale AI models is accelerating demand for cutting-edge infrastructure. As companies worldwide race to scale AI capabilities, SMCI’s servers and storage solutions are well-positioned to benefit from the increased need for high-performance computing hardware.
Steps to Address Compliance Issues: SMCI has made steady progress toward resolving compliance concerns, providing a catalyst for share price appreciation. The company successfully submitted a compliance plan to Nasdaq, which was accepted, and appointed BDO as its new auditor after the resignation of EY. These steps signal a commitment to transparency and governance improvements, potentially reducing risk perception among investors.
Competitive Advantage: As I wrote previously, SMCI’s modular design approach enables rapid customization of server configurations, a key differentiator in a market where flexibility is critical. The company’s recent milestones include shipping over 100,000 GPUs per quarter and delivering 2,000 liquid-cooled racks since June 2024.
Its leadership in liquid cooling technology is particularly noteworthy, as energy-efficient cooling solutions are becoming essential for AI-driven data centers. By reducing capital expenditures for data center operators, SMCI is positioning itself as a cost-effective and innovative player in the space.
Above-Average Growth Prospects: SMCI stock trades at 11.34x forward earnings and 0.75x forward sales. While these metrics indicate that Super Micro is undervalued, they are simply factoring in the uncertainty and risks that the company faces.
4 Reasons to Sell SMCI Stock
Q1 Results Delay: It was bad news for investors when SMCI delayed releasing its results for the first quarter of its fiscal 2025, but it was even worse when its preliminary results disappointed. The company lowered its revenue guidance to the range between $5.9 billion and $6 billion, down from $6 billion to $7 billion. The company also lowered its guidance for earnings per share.
DOJ Scrutiny: The resignation of EY and a Department of Justice investigation majorly hurt SMCI stock. Plus, as my colleague Oleksandr Pylypenko wrote, this is not the first time that Super Micro has experienced these issues. The company was previously delisted from the Nasdaq in 2018 after delaying its regulatory filings. This led to the departure of former CFO Howard Hideshima.
Increased Competition: Regulatory and governance issues have created openings for competitors to capture market share. And compared to its competitors, Super Micro may be harder to trust due to its regulatory issues. As Nvidia (NVDA) reportedly works to form relationships with alternate suppliers, investors should closely watch the impacts on Super Micro’s results.
Lastly, the AI server business is extremely capital-intensive and Super Micro is having trouble raising funds at an interest rate that it would be willing or able to pay. Without funding, Super Micro could struggle to ramp up production to meet demand.
Delisting Threat: Delisting is bad news for any company. If Super Micro were to be delisted from the Nasdaq, its share price would likely fall in response to institutional investors dumping their stakes.
What Do Analysts Say About Super Micro Computer Stock?
Super Micro stock is now a “Hold” on Wall Street, with a mean target price of $49.56. This denotes upside potential of about 46.5% from current levels. Yet, out of 12 analysts in coverage, only 2 still rate SMCI a “Strong Buy” and one a “Moderate Buy,” with 8 maintaining a “Hold” and 2 calling it a “Strong Sell.”
