Super Micro Computer Inc. SMCI embraces the surge in demand for high-performance servers enhanced by cutting-edge generative artificial intelligence (AI) chipsets. SMCI engineers, manufactures, and sells power-efficient, application-tailored server solutions rooted in the x86 architecture.
An astronomical upsurge in the need for high-capacity rack servers has propelled SMCI’s financials to new heights. The stock price of SMCI has ascended by over 98% throughout this year.
To accommodate intensive workloads, data centers are voraciously seeking high-density rack space and direct-to-chip liquid cooling. Super Micro Computer specializes in crafting servers for enterprise, cloud, AI, metaverse, and 5G telco/edge IT infrastructure. Positioned as a premier provider of comprehensive, cutting-edge rack servers capable of fueling sophisticated AI applications.
Robust Clientele of Super Micro Computer
Key clients of SMCI encompass NVIDIA Corp. NVDA, Intel Corp. INTC, and Advanced Micro Devices Inc. AMD. The company is a prominent beneficiary of the thriving AI-driven hardware industry. Skyquest projects that the AI-enhanced hardware market is poised to exceed $84.9 billion by 2031, exhibiting a compound annual growth rate (CAGR) of 15.5% from 2024 to 2031.
Potential of Epic Proportions for SMCI
Super Micro Computer reached its all-time apex at $1,229.0 on March 8. Subsequently, the stock plummeted by more than 50%. Despite this dip, the stock price has surged by nearly 98.5% year to date. The average price target set by brokerage firms reflects a potential increase of 50.4% from the latest closing price of $562.51. Currently, the brokerage target covers a range of $325-$1,500.
Image Source: Zacks Investment Research
Super Micro Computer’s Product Innovation
SMCI offers an array of rack mount and blade server systems, along with various components. SMCI’s Server Building Block Solutions deliver advantages across multiple environments, including data center implementation, high-performance computing, top-tier workstations, storage networks, and standalone server setups.
In the near future, Super Micro Computer anticipates robust sales supported by the launch of a new manufacturing unit in Malaysia later this year. The increasing demand for its DLC servers presents another positive prospect. SMCI foresees its products reducing data center operators’ energy expenditures by up to 40%, while enhancing computational performance.
Compelling Valuation of Super Micro Computer
Currently, Super Micro Computer trades at an enticing valuation compared to its counterparts. The stock boasts a forward price/earnings (P/E) ratio of 18.30X, aligning with the industry’s P/E but lower than the S&P 500’s P/E of 19.46X. With a price/sales (P/S) ratio of 2.30X, SMCI outperforms the industry’s P/S of 2.49X and the S&P 500’s P/S of 2.90X. The stock’s price/book (P/B) ratio stands at 6.27X, below the industry’s P/B of 10.30X but above the S&P 500’s P/B of 3.68X.
Furthermore, Super Micro Computer has showcased adept profit generation, evident in its commendable return on equity (ROE) of 30.57%. This figure outshines the industry’s ROE of 15.34% and the S&P 500’s ROE of 16.52%. ROE exceeding 20% is generally deemed robust.
SMCI anticipates a revenue growth rate of 87.5% and an earnings growth rate of 51.65% for the current fiscal year (ending June 2025). The Zacks Consensus Estimate for the current-year earnings has remained unchanged over the past week.
Image Source: Zacks Investment Research
The Elite Semiconductor Stock According to Zacks
While NVIDIA has boasted a tremendous +800% surge, a new semiconductor stock emerged. This underestimated gem, just 1/9,000th the size of NVIDIA, has considerable room for growth. With steady earnings expansion and an expanding clientele, it’s primed to cater to the insatiable hunger for Artificial Intelligence, Machine Learning, and Internet of Things. Projections indicate a colossal surge in global semiconductor manufacturing from $452 billion in 2021 to $803 billion by 2028.