Is Super Micro Stock Too Cheap to Ignore After a 62% Drop?
Super Micro Computer (SMCI) has had a rough ride over the past year, with its stock plummeting by more than 62% amid allegations of accounting manipulation and operational challenges. The decline began following a report from Hindenburg Research last year, accusing the company of accounting irregularities and other serious missteps. This led to investor panic, which was exacerbated when Super Micro delayed its annual filing.
Eventually, Super Micro submitted its overdue financials, narrowly avoiding a potential delisting from the Nasdaq. However, the relief was short-lived. The company's fiscal third-quarter results disappointed investors further, and a guidance cut for the full year compounded the damage.
Super Micro reported $4.6 billion in revenue, which was below expectations. Management attributed the shortfall to a pause in purchasing decisions, as customers weighed their options between Nvidia's (NVDA) Hopper GPUs and the Blackwell platform. This temporary hesitation in AI infrastructure spending has led to deferred orders, although the company believes many of these deals will land in the June and September quarters.
Still, Super Micro trimmed its full-year revenue outlook for fiscal 2025. The company now expects revenue between $21.8 billion and $22.6 billion, down from a previous forecast of $23.5 billion to $25 billion. The reduced guidance reflects lingering uncertainty about the pace of enterprise and hyperscaler AI infrastructure spending.
AI-Driven Demand to Support Recovery
While these developments paint a challenging picture for Super Micro in the near term, the sharp decline in its stock price may already reflect these concerns. Moreover, the strong demand for AI GPU solutions in enterprise and cloud markets suggests potential opportunities ahead.
Despite the short-term headwinds, Super Micro's underlying business remains deeply tied to solid secular trends in tech, particularly the growing demand for AI computing infrastructure. The company's AI GPU platforms now account for more than 70% of total revenue, and demand from both enterprise and cloud service providers remains strong.
The company continues to ramp up production of its Data Center Building Block Solutions (DCBBS), which support next-generation GPUs and are designed to offer faster deployment, lower power and water usage, and significantly better efficiency and total cost of ownership (TCO). These solutions are already being delivered in volume, including new air-cooled and liquid-cooled systems for Nvidia's B200 HGX platform and advanced racks.
To further enhance its AI offerings, SMCI has expanded its support for Advanced Micro Devices (AMD) platforms, including the MI325X, and plans to support upcoming chip releases like Nvidia's B300 and AMD's MI350 later this summer. The company's growing portfolio of AI offerings will support future growth.
SMCI's leadership in green computing, primarily through its direct liquid cooling (DLC) technology, gives it a competitive advantage. Last year, the company shipped 4,000 high-power AI racks equipped with DLC, helping customers slash energy costs. The next generation, DLC-2, promises even better results, driving demand.
The company's global footprint continues to grow. A new Malaysia campus has started shipping products, while operations in Taiwan and Europe are scaling up. SMCI is also expanding its U.S. manufacturing capacity to support key partners and government initiatives, strengthening its logistics in an uncertain macro environment.
Is SMCI Stock a Value Play for Patient Investors?
Super Micro's long-term investments in DLC and DCBBS provide a competitive advantage. These systems deliver cost and energy benefits, driving higher demand in the coming quarters.
While near-term macroeconomic and market uncertainties have analysts maintaining a 'Hold' rating, SMCI's early mover advantage in AI infrastructure, product innovation, and advancements in DLC technology further solidifies its competitive position, enabling it to capitalize on AI demand, deliver strong growth in the long term, and gain market share.
For investors willing to weather short-term volatility, this beaten-down stock represents a bargain near current levels.
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