Should You Buy Super Micro Computer Stock After Its 1,480% Gain in 5 Years? Wall Street Has a Clear Answer for Investors.
Super Micro Computer (NASDAQ: SMCI) shareholders have been through a whirlwind lately. While the stock is up 1,480% in the last two years, it has also fallen over 70% from its record high in the last eight months. As one of Nvidia‘s largest partners, the server maker should benefit as demand for artificial intelligence (AI) infrastructure increases, but Supermicro has also been accused of accounting manipulation.
Among the 12 analysts who follow the company, the median 12-month price target of $30.50 per share implies an 8% downside from its current share price of $33. That means six analysts think the stock will fall more than 8% in the next year. Additionally, 19 analysts followed Supermicro three months ago, meaning seven have recently discontinued coverage. Wall Street is clearly shying away from the company.
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Here are the important details.
Super Micro Computer builds servers, including full server racks equipped with storage and networking that provide customers with a turnkey solution for data center infrastructure. Its internal manufacturing capabilities and “building block” approach to product development let it bring new technologies to market more quickly than its competitors, often by two to six months.
Indeed, earlier this year, Rosenblatt analyst Hans Mosesmann wrote, “Super Micro has developed a model that is very, very quick to market. They usually have the widest portfolio of products when a new product comes out.” Those advantages have helped Supermicro secure a leadership position in AI servers, a market forecast to grow at 30% annually through 2033, according to Statista.
Importantly, Supermicro is also the top supplier of direct liquid cooling (DLC) systems, which could help the company strengthen its position in AI servers. DLC systems reduce data center power consumption by 40% and occupy 80% less space than traditional air-cooled systems. AI servers generate more heat than general-purpose servers, so demand for DLC systems is expected to rise quickly.
Indeed, while less than 1% of data centers have historically used liquid cooling, Supermicro estimates 15% (and maybe as many as 30%) of new data center installations will use liquid cooling in the next two years, and the company says it is positioned to “capture the majority share of that growth.”
As mentioned, while Supermicro shares are up 1,480% in the last two years, the stock has also nosedived more than 70% from its record high in the last eight months. Below is a month-by-month timeline detailing the events that led to that rapid decline in value.
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