Analysts See Another 43% Gain for Super Micro Stock, But Risks Linger
(SMCI) stock has been on a roller coaster ride. It has dropped roughly 65% from its 52-week high, weighed down by regulatory and legal hurdles. But lately, the tide seems to be turning. The company is now back in compliance with Nasdaq listing requirements, and surging, artificial intelligence (AI)-led demand for its high-efficiency server and storage systems is fueling renewed optimism. As a result, its stock has made an impressive comeback, climbing nearly 40% in the year to date.
Despite this rally, analysts believe the stock still has plenty of upside potential. On average, their price targets suggest an additional 43% surge over the next 12 months. However, investors should take note of potential risks, particularly Super Micro's heavy reliance on a few key customers.
With this background, let's look at the factors that could shape SMCI stock's future trajectory.
What Can Drive Super Micro's Growth?
Super Micro is benefitting from higher AI infrastructure spending and is witnessing solid demand for its high-performance server and storage systems. The company's air-cooled and direct liquid cooling (DLC) AI server platforms are proving to be particularly popular, helping drive impressive financial results.
For the second quarter of fiscal 2025, Super Micro reported a 54.9% increase in net sales year-over-year. This growth reflects demand for its air-cooled and DLC (green computing) rack-scale AI GPU platforms from new and existing customers. Notably, the AI-related platforms contributed over 70% of its revenue during the quarter, fueled by demand from enterprise customers and cloud service providers.
Super Micro is ramping up shipments of Nvidia's (NVDA) latest Blackwell products, along with air-cooled and liquid-cooled NVIDIA B200 HGX systems. With its NVIDIA GB200 racks ready for deployment, the company can capture further AI infrastructure spending. Management expects strong growth to continue through 2025 and beyond, provided the supply chain keeps pace with demand.
Super Micro is also doubling down on liquid-cooled data center infrastructure. The company estimates growing adoption of liquid cooling technology as it requires less power. Its investment in DLC technology provides a significant competitive edge, enabling it to scale efficiently and meet rising demand.
Additionally, Super Micro's latest generation of edge servers brings advanced AI capabilities closer to where data is generated. These compact systems offer up to 2.5 times more cores with improved energy efficiency, making them ideal for Edge AI, telecom, networking, and CDN workloads. This innovation is expected to drive demand and revenue growth.
With all this momentum, the company expects to generate revenue between $23.5 billion and $25 billion in fiscal 2025, representing a 57%-67% increase year-over-year. Even more impressive, management forecasts revenue could reach $40 billion in its fiscal 2026.
Is Super Micro Too Reliant on Key Customers?
Super Micro's stock is well-positioned to benefit from AI-driven demand for its products. However, the company faces a significant risk due to its reliance on a few large customers.
According to its latest filing, two major customers made up 27.1% and 30.6% of its net sales in Q2 (the three months ending Dec. 31, 2024). Over the first half of fiscal year 2025, three large customers accounted for 23.9%, 21%, and 14.9% of net sales.
This dependence on a handful of customers has intensified over the past two quarters, raising concerns about the company's financial stability.
The Bottom Line
Super Micro is at the center of the AI and cloud computing revolution, making it an exciting but volatile investment. The company's demand trends, innovative AI infrastructure solutions, and aggressive revenue growth targets suggest substantial upside potential. However, regulatory challenges, customer concentration risks, and supply chain constraints remain hurdles that could impact its performance.
Analysts maintain a 'Hold' consensus rating on the stock. But with an average price target of $58.50 — 43% higher than its closing price of $40.84 on March 11 — there's still room for potential gains in the near term.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
an hour ago
- Globe and Mail
Where Will Confluent Stock Be in 3 Years?
It has been just under four years since Confluent (NASDAQ: CFLT) made its stock market debut in June 2021. A look at its stock price chart will show that investors in the data streaming specialist have endured a difficult time since November of that same year. Confluent stock was in fine form in 2021 following its initial public offering. However, like many other young tech stocks in late 2021, the stock price began a downhill run late in the year. Some of these stocks eventually recovered. In Confluent's case, the stock lost 46% of its value since its initial public offering (IPO) and 74% when compared to its all-time high. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Let's check why that has been the case and see if this cloud computing stock has the ability to regain its mojo and jump higher over the next three years. Confluent's expensive valuation has been the stock's undoing Confluent was trading at a whopping 37 times sales in 2021, which means that it needed to maintain high growth rates to justify its rich valuation. However, its sales growth rates have been dropping over the years, as we can see from the table below. Data source: Confluent quarterly reports. The reduction in Confluent's top-line growth is a big reason why the stock has fallen out of investors' favor. As a result, it is now trading at just under 8 times sales, which is lower than its five-year average price-to-sales ratio of 12. Another thing worth noting is that Confluent's sales multiple is now in line with the U.S. technology sector's average sales multiple. Buying Confluent at its current valuation could turn out to be a smart long-term move, as the company is now sitting on an added catalyst in the form of artificial intelligence (AI). Confluent's cloud-based data streaming platform is used by customers to bring data out of silos and connect it in real time to make decisions quickly. The company's platform finds applications in multiple areas such as inventory management, fraud detection, and customer service. It's now being applied in generative AI and agentic AI applications as well, as Confluent's platform allows customers to use relevant data in real time for training large language models (LLMs) and AI agents. As a result, Confluent is now winning a bigger share of customers' wallets, along with bringing new customers into its fold, which should set the company up for robust long-term growth. A massive addressable market points toward better times for the company Confluent now sees its addressable market exceeding $100 billion this year. That's double its estimated addressable market four years ago. Even better, the accelerated growth in its customer base suggests that it is well on track to capitalize on this massive opportunity. Confluent's overall customer base jumped by 20% year over year in the first quarter of 2025. That was a major improvement over the 9% year-over-year increase in its customer base in the year-ago period. Importantly, Confluent is gaining more business from its existing customers. This can be judged from the company's dollar-based net retention rate of 117%, a metric that compares its annual recurring revenue (ARR) from customers at the end of a quarter to the ARR from the same customer cohort in the year-ago period. So, an ARR of more than 100% suggests that existing customers are spending more money with Confluent. The higher spending by Confluent's older customers is also driving a solid bump in its margins. The company's non- GAAP operating margin increased by six percentage points year over year in Q1. This explains why the company's non-GAAP earnings increased by 60% from the year-ago period to $0.08 per share. The company has guided for $0.36 per share in earnings for 2025, which points toward a 24% increase from last year. However, don't be surprised to see Confluent doing better than that following the healthy increase in Q1, especially considering the pace at which it is adding new customers and encouraging existing ones to spend more money. Not surprisingly, analysts are forecasting an acceleration in Confluent's bottom-line growth over the next couple of years. Data by YCharts. The stronger growth in Confluent's earnings in 2026 and 2027 points toward better times for the stock over the next three years, as the market could reward this impressive bottom-line jump with healthy gains. As such, buying Confluent right now makes sense from a long-term point of view. The correction in the company's stock price since its IPO has made it a better buy, considering its lucrative end-market opportunity and bright prospects. Should you invest $1,000 in Confluent right now? Before you buy stock in Confluent, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Confluent wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $875,479!* Now, it's worth noting Stock Advisor 's total average return is998% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
Globe and Mail
2 hours ago
- Globe and Mail
Zacks Investment Ideas feature highlights: Nvidia, Taiwan Semiconductor and Vertiv
For Immediate Release Chicago, IL – June 13, 2025– Today, Zacks Investment Ideas feature highlights Nvidia NVDA, Taiwan Semiconductor TSM and Vertiv VRT. Are AI Stocks Overpriced? These 3 Leaders Look Cheap The AI trade has become something of a consensus on Wall Street. From mega cap tech to speculative startups, nearly every corner of the market is angling for exposure to the next wave of artificial intelligence innovation. Yet despite the mainstream attention, some of the most critical players in the AI boom, Nvidia, Taiwan Semiconductor and Vertiv, are still trading at some of their most reasonable valuations in recent history. What's more, these aren't speculative bets. Each of these companies is delivering strong revenue and earnings growth, with forecasts that remain robust well into next year and beyond. While many investors chase the next big AI story, NVDA, TSM, and VRT offer a grounded, but still high-upside path through the AI trade. Below, we break down why these three names still represent compelling GARP (Growth at a Reasonable Price) opportunities within the AI ecosystem. Taiwan Semiconductor: Among the Most Compelling Large-Cap Stocks Taiwan Semiconductor plays a critical and irreplaceable role in the global semiconductor supply chain, especially when it comes to leading edge artificial intelligence chips. As the world's largest semiconductor fabricator, TSM is the behind-the-scenes giant enabling advanced computing across industries. In May, the company reported a nearly 40% year-over-year jump in monthly revenue, reflecting surging demand for its cutting-edge AI chips. Looking ahead, Taiwan Semi expects full-year sales to grow by 28.2% in 2025, followed by another 14.8% gain in 2026. Long-term, earnings are forecast to grow at an impressive 20.8% annual rate over the next three to five years, driven by sustained AI and high-performance computing demand. While TSM currently holds a Zacks Rank #3 (Hold), reflecting stable earnings revisions, the growth trajectory remains firmly intact. Valuation-wise, the stock trades at 23.1x forward earnings—right in line with its five-year median. For a company of TSM's strategic importance and growth potential, this multiple appears not just reasonable, but attractive. In a market where many AI plays command stretched premiums, TSM stands out as one of the most compelling large-cap opportunities in the market broadly. Nvidia: Shares Trading Well-Below Historical Valuations Nvidia remains the undisputed leader in AI hardware design, with its GPUs forming the backbone of nearly every major AI training and inference system in the world. Its dominance in the data center space is unmatched, and the company is already positioning itself for the next frontier—expanding into areas like robotics and quantum computing. Fundamentally, Nvidia's growth story remains extraordinary. Analysts project earnings to grow at a staggering 28.2% annually over the next three to five years, fueled by unrelenting demand for AI infrastructure. Sales are expected to surge 51.4% this year, followed by another 25.1% gain next year, highlighting both near-term momentum and long-term scalability. Despite this rapid growth, Nvidia's valuation is far from excessive. Shares currently trade at 36x forward earnings, significantly below the stock's five-year median of 55x. For a company with Nvidia's technological leadership, accelerating fundamentals, and global relevance in AI, today represents an opportunity to buy a high-growth compounder at a historically discounted valuation. Vertiv: Stock Bounces Back After April Correction Vertiv has quickly emerged as one of the most important behind-the-scenes players in the AI boom, offering critical power and thermal management solutions for data centers—the physical backbone of the AI revolution. After a sharp but short-lived correction in April, the stock has rebounded strongly as investors refocus on the accelerating demand for data center infrastructure. Vertiv's business model is uniquely advantaged. It provides the hardware and services that enable hyperscalers and enterprises to build out AI-ready capacity at scale. With data center spending expected to grow rapidly in the years ahead, Vertiv is well positioned to capture consistent and expanding demand. Vertiv's business is firing on all cylinders. Sales are projected to grow in the high teens for each of the next two years, while earnings are expected to rise at a robust 27.2% annually over the next three to five years. Despite its recent run, gaining a dizzying 700% in the last five years, the stock still trades at 30.6x forward earnings, a premium to its five-year median of 23.3x, but justified by its exceptional growth profile. With a PEG ratio just above 1, Vertiv offers a compelling blend of momentum, earnings power, and long-term upside at a valuation that still makes sense. Should Investors Buy Shares in NVDA, TSM and VRT? There are plenty of ways to gain exposure to the AI boom, from speculative software startups to legacy tech names trying to reinvent themselves, but few companies are as essential to the AI supply chain and trade at valuations this grounded. Nvidia, Taiwan Semiconductor, and Vertiv are building the infrastructure to make AI possible. Each company boasts strong earnings and sales growth, durable competitive advantages, and surprisingly reasonable valuations given their dominance and forward outlook. Whether you're a long-term investor seeking growth or someone trying to avoid the froth of more speculative AI names, these three stocks offer a compelling path to participate in one of the most transformative trends of this decade, and without overpaying for the opportunity. Why Haven't You Looked at Zacks' Top Stocks? Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year. Today you can access their live picks without cost or obligation. See Stocks Free >> Media Contact Zacks Investment Research 800-767-3771 ext. 9339 support@ Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVIDIA Corporation (NVDA): Free Stock Analysis Report Vertiv Holdings Co. (VRT): Free Stock Analysis Report
Globe and Mail
3 hours ago
- Globe and Mail
5 No-Brainer Artificial intelligence (AI) Stocks to Buy Right Now
Artificial intelligence (AI) is quickly changing the world we live in. With the technology perhaps being a once-in-a-generation opportunity, it's not too late to invest in the stocks leading the AI charge. Let's look at five leading AI stocks to buy right now. 1. Palantir Technologies Palantir Technologies (NASDAQ: PLTR) is quickly emerging as one of the most compelling growth stories in AI by helping organizations actually put AI to work. By gathering data and structuring it into an "ontology," Palantir's AI platform (AIP) maps digital assets to real-world objects and processes to let customers apply AI to solve real-world problems. AIP is being used for a variety of tasks, from optimizing supply chains to automating underwriting to even monitoring for sepsis in hospitals. While the company has long been an important government vendor, Palantir's growth is currently being powered by the U.S. public sector. Given the wide array of applications across industries that AIP can be used for, Palantir has a massive opportunity in front of it. Recently, Palantir has introduced AI agents within AIP that go beyond analysis to take action. Agentic AI is becoming the next big AI push, and could be a big growth driver for the company. That said, the stock isn't cheap, and government budget cuts could potentially impact growth. Still, Palantir's technology looks unmatched, and the company is well-positioned to be a long-term AI leader. 2. Nvidia Nvidia (NASDAQ: NVDA) continues to be one of the top ways to invest in the AI infrastructure boom. Its graphics processing units (GPUs) are the backbone of AI data centers thanks to their powerful parallel processing capabilities. And as the engine that helps run AI workloads, demand for GPUs continues to soar as organizations race to build and run AI models and apps. Nvidia's real moat, however, comes from its CUDA software platform, which it created to make it easier for developers to program its chips. Since then, it has built a powerful suite of tools and libraries that further enhance its GPUs' performance for AI workloads. The tight integration between its powerful GPUs and CUDA helped Nvidia attain an over 90% share in the GPU market in Q1. Its new Blackwell chips are ramping up faster than any product in its history, and demand for its full-stack AI "factories" continues to surge. Beyond the data center, Nvidia is also gaining traction in the automotive space, with revenue expected to hit $5 billion this year. A slowdown in AI spending is a risk, but Nvidia remains one of the best-positioned companies to benefit from the AI infrastructure build-out. 3. Advanced Micro Devices While it may trail Nvidia by a wide margin in the GPU space, Advanced Micro Devices (NASDAQ: AMD) is nonetheless still carving out a niche in AI infrastructure, especially in inference. While Nvidia's GPUs dominate AI training thanks to its powerful CUDA software platform, inference is a bit of a different story. Inference is less technically demanding, with more emphasis on latency, power, and cost. In fact, AMD recently said that one of the largest AI model companies is using its chips for a significant portion of its daily inference traffic. That's important because the AI inference market is expected to become much larger than training over time. Even if AMD is only able to take some moderate market share away from Nvidia, given the size and growth of this market, it would still be meaningful. At the same time, AMD has become a leader in data center central processing units (CPUs), where it's steadily gaining share. While not as large of a market as GPUs, this is still a strong and growing part of the AI infrastructure build-out. The biggest risk for AMD is that it will always play second fiddle to Nvidia, or that AI infrastructure spending slows. But if inference spending takes off and AMD can grab some share, its stock should have a lot of upsides from here. 4. Taiwan Semiconductor Manufacturing Another beneficiary of the AI infrastructure boom is Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC. As the world's leading semiconductor contract manufacturer, TSMC is the company that actually makes advanced chips, such as GPUs. Profitably producing advanced chips at scale isn't easy. It requires cutting-edge technology, high utilization, and precision manufacturing. For its part, TSMC has become the leader in advanced nodes and packaging, which is the manufacturing process that allows more transistors to fit on a chip, making them both more powerful and energy efficient. With rivals Intel and Samsung struggling, TSMC has become the go-to partner for top chip designers. This has given the company strong pricing power and made it an integral part of the semiconductor supply chain. TSMC is currently working closely with its largest customers to expand capacity to keep up with the high demand for AI chips. The biggest risk is a slowdown in AI infrastructure spending, which could hit both revenue and fab utilization. But given how tight advanced-node capacity is today, that risk seems manageable. For long-term investors, TSMC looks like a great way to play the continued growth of AI and advanced semiconductors. 5. Alphabet While Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) continues to face questions about whether AI will disrupt its dominant search business, the reality is far more nuanced. Yes, Apple recently claimed Google searches through its Safari browser fell for the first time, but that came during an antitrust trial, where Apple had every incentive to downplay Google's strength. Meanwhile, Alphabet said its search queries continue to grow, with Q1 search revenue climbing 10%. More importantly, Alphabet is adapting, which is what all great technology companies eventually have to do. Its new AI-powered search tools are focused on monetizing commercial queries, which has always been its bread and butter. Features like Shop by AI and virtual try-ons aren't gimmicks; they're smart moves to capture purchase intent in an AI world. Meanwhile, with decades of adtech experience and a massive distribution advantage through Android and Chrome, Alphabet is still in the driver's seat. Beyond search, Alphabet is seeing strong growth in its cloud computing business, Google Cloud, as customers build AI models and apps through its Vertex AI platform and run them on its data center infrastructure. In addition, the company has also taken the lead in autonomous driving through its Waymo robotaxi business, which is expanding quickly throughout the U.S. This is a compelling long-term opportunity not priced into the stock. Risks remain around government regulation and AI competition, but with a forward P/E of less than 19 times, the stock is dirt cheap for a company with so many growth levers. Should you invest $1,000 in Palantir Technologies right now? Before you buy stock in Palantir Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $875,479!* Now, it's worth noting Stock Advisor 's total average return is998% — a market-crushing outperformance compared to174%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025
