Valuations eventually matter—and Super Micro Computer stock may be falling because of it.
Super Micro stock has tripled this year on excitement over the growth potential of its high-end AI servers, which are often filled with
Nvidia
GPUs. That seems to be too much for Wells Fargo analyst Aaron Rakers, who initiated coverage on the shares on Friday with an Equal Weight rating and $960 price target.
Super Micro shares are “already discounting solid upside,” he wrote. “We believe shares will be highly susceptible to any indications of tempering GPU-based server demand.”
In Friday trading, Super Micro stock was off 17.5% to $828.53.
The analyst believes at the current valuation investors expect Super Micro to generate more than $30 billion in annual revenue in the coming years—more than double the current Wall Street estimate for this fiscal year.
“We remain cautious on increased competition in the AI server market from traditional vendors,” he wrote.
Barron’s readers are familiar with the Super Micro story. In December, we said in a cover story that server maker is one of three companies best positioned to take advantage of the AI infrastructure build out inside data centers.
In late January, Super Micro delivered stellar quarterly results and raised its fiscal 2024 revenue forecast significantly to a range of $14.3 billion to $14.7 billion, above a prior forecast of $10 billion to $11 billion.
After the earnings report, Barron’s wrote that the $800 level looked like “a reasonable level for Super Micro shareholders to take profits.”
Even the hottest AI stock doesn’t grow straight to the sky.
Write to Tae Kim at [email protected]
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