Super Micro Just Nabbed a $20 Billion Partnership. Should You Buy SMCI Stock Now?
Supermicro (SMCI) shares are up more than 17% this afternoon after the AI server giant announced a $20 billion AI infrastructure deal with DataVolt – a data center company based out of Saudi Arabia.
The multi-year agreement will expedite delivery of GPU platforms and rack systems to hyperscale AI campuses that DataVolt has in Saudi Arabia as well as in the U.S., a press release confirmed on Wednesday.
Including today's rally, SMCI stock is up more than 50% versus its recent 1-month low.
Significance of DataVolt Deal for Supermicro Stock
Teaming up with DataVolt is significant for Super Micro Computer as it solidifies its presence in Saudi Arabia – a nation that's investing rather heavily in AI infrastructure.
Additionally, a deal of this scale meaningfully expands SMCI's revenue pipeline and reinforces its growth trajectory in the rapidly growing artificial intelligence market.
It's a multi-year agreement, which means sustained revenue, reduced uncertainty, and improved earnings visibility for Supermicro investors.
They're cheering the DataVolt news because it arrived at a time when SMCI stock was struggling due to a revenue slowdown. In Q3, the Nasdaq-listed firm generated $4.6 billion in revenue – well below $5.42 billion that analysts had forecast.
Raymond James Initiates SMCI Shares at 'Outperform'
Supermicro stock is rallying at the time of writing also because a Raymond James analyst, Simon Leopold, assumed coverage of the AI server company with an 'Outperform' rating this week.
SMCI is a 'market leader in AI-optimized infrastructure' that's strongly positioned to expand its market share moving forward, he told clients in a research note on May 13.
Leopold acknowledged near-term challenges facing Super Micro Computer in his report but said a compound annualized revenue growth rate of more than 25% support a re-rating.
Is There Any Further Upside Left in Super Micro Computer?
Note that consensus estimates, however, suggest much of the good news is already baked into the SMCI stock price at current levels.
Wall Street currently rates Supermicro at 'Hold' on average, with the mean target of $44.37 indicating potential downside from here.
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