TLDR:
- Super Micro Computer (SMCI) stock rose 10.66% on Monday to $33 amid market caution
- The company has partnered with Nvidia and Weka on a new optimized storage server
- SMCI shares have fallen over 70% from 2024 high of $118.82 following Hindenburg report
- Company resolved regulatory issues by appointing new auditor and filing delayed reports
- Preliminary Q2 sales forecast shows 54% year-over-year growth to $5.6-5.7 billion
Super Micro Computer Inc. (SMCI) shares jumped 10.66% on Monday, closing at $33 as investors sought bargains in AI-related stocks despite broader market concerns over trade tensions.
The stock’s rise came as the Dow Jones and S&P 500 fell by 0.91% and 0.23% respectively. The tech-heavy Nasdaq managed a slight gain of 0.10%.
SMCI’s climb ended a two-day losing streak for the server maker. The company’s stock moved higher alongside other AI and quantum computing names like IonQ Inc. (NYSE ) and Rigetti Computing (NASDAQ).
Monday’s gains offer a glimmer of hope for SMCI investors who have endured a rough ride. The stock has plummeted more than 70% from its March 2024 peak of $118.82.
Much of the decline followed a scathing August report from short-seller Hindenburg Research. The report accused the company of accounting irregularities, self-dealing, and sanctions evasion.
Regulatory Challenges Resolved
The fallout was swift. SMCI delayed filing its 2024 annual report while its auditor, Ernst & Young, resigned. This put the company at risk of being delisted from Nasdaq.
However, the company has made significant progress addressing these issues. In November, SMCI appointed BDO USA as its new auditor and submitted a plan to regain compliance with Nasdaq’s listing rules.
An internal review completed in December found no evidence of managerial misconduct. By February, the company had submitted its delayed filings, putting it back in compliance with listing requirements.
With regulatory concerns mostly in the rearview mirror, investors can refocus on the company’s business fundamentals.
Strong Growth Prospects
Despite the stock price decline, SMCI’s business appears robust. The company’s preliminary second-quarter earnings forecast suggests sales of $5.6 billion to $5.7 billion, representing a 54% year-over-year increase.
This growth is fueled by strong demand for SMCI’s computer servers. The company turns GPUs made by partners like Nvidia and AMD into ready-to-use servers for data center clients.
One of SMCI’s competitive advantages is its energy-efficient designs. These are particularly valuable for companies trying to manage power-hungry AI workloads.
In recent news, SMCI partnered with Nvidia Corp. (NASDAQ) and Weka to develop a new optimized storage server for high-performance software-defined storage workloads.
Navigating Trade Tensions
The project will “allow customers to benefit from NVDA’s innovations in both CPUs and DPUs,” according to company statements. The server uses an NVIDIA Grace CPU Superchip with 144 Arm Neoverse V2 cores for high-performance I/O capabilities.
“We have demonstrated that the system can fully unleash the system’s PCIe Gen5 performance SSD bandwidth with linear scalability. Supermicro continues to bring to market the most advanced and optimized storage solutions available,” SMCI said.
Like many tech companies, SMCI faces uncertainty from the recently announced “Liberation Day” tariffs. The good news is that levies on Taiwan aren’t expected to apply to semiconductor chips, which are key components in SMCI’s supply chain.
While some parts of the company’s supply chain will likely be affected by the tariffs, foreign competitors may face even greater challenges.
SMCI is also taking steps to minimize trade-related risks. In February, the San Jose-based company announced plans to expand its U.S. manufacturing capacity with a new 300,000-square-foot facility.
When complete, this expansion will bring SMCI’s total U.S. manufacturing footprint to nearly 3 million square feet. This move could help the company navigate potential trade uncertainty and align with onshoring policies.
Looking ahead, SMCI is positioned to benefit from the rollout of Nvidia’s new Blackwell-based AI chips. These chips offer substantial performance improvements over previous generations.
However, it’s worth noting that while SMCI benefits from Nvidia’s innovation, it operates with much thinner margins. The company’s gross margin of around 12% is substantially lower than Nvidia’s 75%.
Monday’s stock price increase suggests investors may be starting to look past the company’s regulatory troubles to focus on its growth potential in the expanding AI server market.
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