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Tech stocks Super Micro Computer (SMCI) and Apple (AAPL) are in the spotlight this week, for very different reasons. Apple has been making headlines as its stock price nears record highs. On the other hand, Super Micro Computer has been buzzing for a different reason — the company’s 10-for-1 stock split, which officially takes effect today. This means that Super Micro shares, at their newly reduced face value, could now appeal to a broader range of investors.
With these tech giants drawing attention, let’s examine what’s on the horizon for each company and what investors should watch out for.
Super Micro Computer (SMCI): A Stock Split Amid Challenges
Super Micro Computer’s stock split comes at a time when the company is under pressure. Its stock has dropped about 49% in the past three months, and is down more than 66% from its 52-week high. The steep decline was triggered by a delay in filing its annual report, which raised concerns about its internal controls over financial reporting.
On top of that, short-seller Hindenburg accused the company of accounting manipulation. These challenges were further compounded by a Wall Street Journal report stating that Super Micro is under investigation by the Justice Department over its accounting practices. Naturally, these headlines have shaken investor confidence.
While Super Micro is facing these challenges, it’s also a leader in the booming artificial intelligence (AI) infrastructure solutions segment. The demand for its direct liquid cooling (DLC) rack solutions is growing rapidly, which could be a key driver of revenues in the coming years. In addition, its new product lineup, designed to offer cost-effective AI solutions, will likely see solid growth.
The company’s margins are also expected to improve as supply-chain headwinds ease. Moreover, factors like a better product mix, manufacturing efficiencies, and increased production in Asia could further support its margins.
Given the recent negative news, some analysts are hesitant to recommend the stock. SMCI stock sports a “Moderate Buy” consensus rating.
In summary, Super Micro stock will likely remain volatile in the short term. For investors willing to look past the near-term noise, Super Micro’s leadership in the AI infrastructure space and its significant share price correction present an attractive buying opportunity.
Apple (AAPL): Riding High, But Is Caution Warranted?
Apple stock has surged over 32% in the past six months, and is now trading near record highs. However, recent reports suggest that demand for the iPhone 16 has been weaker than expected, raising some concerns. While the initial sales for this model may not be as strong as anticipated, it's still too early to make any definitive conclusions about its performance.
Apple is focusing on strategies to boost sales across its products and services. A key driver of future growth is the rollout of Apple Intelligence, which introduces new AI-powered features. These innovations and Apple's strategic pricing could encourage users to upgrade their devices, boosting sales and attracting new customers.
In addition to hardware, Apple's ecosystem could continue to expand, especially as the company enhances its AI offerings. A growing base of Apple devices naturally fuels demand for its Services division. In the last quarter, Apple's Services revenue hit a record $24.2 billion, marking a 14% year-over-year increase, with paid subscriptions reaching new heights. The company also achieved record revenues in areas like advertising, cloud, and payment services.
As the number of Apple devices in use grows, Services revenue is expected to keep rising, further bolstering Apple's financial health. Additionally, Apple is broadening its market presence, particularly in the business and enterprise sectors, which presents new revenue streams beyond consumer markets.
While Apple remains a solid long-term investment, short-term risks such as macroeconomic uncertainty and potential sales pressure linger. Analysts currently give the stock a "Moderate Buy" consensus rating.
The Bottom Line on SMCI and AAPL
Super Micro Computer and Apple stocks are navigating unique challenges and opportunities. Super Micro faces scrutiny over its accounting practices and has seen a steep decline in its share price. However, its leadership in AI infrastructure and growing demand for innovative cooling solutions position it for future growth.
On the other hand, Apple continues to thrive, with its stock near record highs, despite some concerns about iPhone demand. Apple's expanding AI-powered services and growing ecosystem offer compelling buy-and-hold appeal.
While both stocks have solid long-term potential, investors should be mindful of the near-term risks and challenges they face.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
