Expectations of strong growth in the artificial intelligence (AI) server market have sent shares of Super Micro Computer (SMCI -1.83%) up 176% year to date and 755% over the last 12 months. The stock briefly reached a high of $1,077 last week before pulling back.
However, even with that sizeable rise in value, some analysts on Wall Street still see further upside.
Rosenblatt Securities analyst Hans Mosesmann recently raised the price target on the stock from $700 to $1,300 (a new Street high). The new target represents an upside of 65% from Super Micro Computer's closing price on Tuesday.
As always with these Wall Street calls, it's not the price target that long-term investors should care about but the reasoning behind the call.
Why Wall Street likes Super Micro Computer
Rosenblatt based its call on the strong tailwind in AI that is projected to grow at a compound annual rate of 50% in the years to come. The analysts see Super Micro gaining significant market share, which the company is already achieving. The company credited the strong demand for its plug-and-play rack systems and market share gains for the 103% year-over-year increase in revenue last quarter.
Is Super Micro stock a buy?
Super Micro Computer operates in a competitive market for server systems. Some investors may argue that Nvidia is the better stock to buy since strong demand for its graphics processing units (GPUs) was credited for driving some of the demand for Super Micro last quarter.
Still, Super Micro is emerging as a go-to supplier for these rack computing platforms designed for AI. The stock's forward price-to-earnings ratio of 36 is almost half the company's recent earnings growth, which could support further gains if the demand for AI continues at this pace.
