Shares of server and storage solution specialist Super Micro Computer (SMCI 1.10%), also known as Supermicro, resumed their relentless push higher Thursday, surging by as much as 21%. As of 10:56 a.m. ET, the stock was still up 19.4%.
A check of all the usual sources -- regulatory filings, analyst commentary, and financial reports -- found no company-specific news fueling the gains, which suggests the rise was due primarily to a robust earnings report from a leader in the artificial intelligence (AI) revolution: Nvidia (NVDA 2.13%).
NASDAQ: SMCI
Key Data Points
Blockbuster results
For its fiscal 2024 fourth quarter (which ended Jan 28.), Nvidia's revenue soared by 265% year over year to a record $22.1 billion. The chipmaker's profits were equally robust as adjusted earnings per share (EPS) surged by 486% to $5.16. Nvidia has arguably been one of the biggest beneficiaries of the accelerating adoption of generative AI, and its performance bodes well for continued strong growth for Supermicro.
It wasn't just Nvidia's results but its forecast that fueled Supermicro's move higher. For its fiscal 2025 first quarter, Nvidia's management is guiding for revenue of $241 billion, which would amount to year-over-year growth of 233%.
What this all has to do with Supermicro
If Nvidia has been the standard-bearer for the rapid adoption of generative AI, Supermicro has been the trend's unsung hero. Nvidia graphics processing units (GPUs) have provided the computational horsepower for the AI revolution, but it's Supermicro's AI-centric servers that are making it possible for many users. And while Nvidia stock has gained 277% over the past year (as of this writing), Supermicro is up by more than 900%.
Analysts have been scrambling to update their models, with Supermicro picking up back-to-back Street-high price targets over the past week. The most recent sharp adjustment came earlier this week from Rosenblatt Securities analyst Hans Mosesmann, who raised his price target from $700 to $1,300 while maintaining his buy rating on the stock. This suggests potential upside of 77% compared to Wednesday's closing price.
In a note to clients, the analyst posited that not only will Supermicro continue to profit from the growing adoption of AI, but will capture "material" share gains in the server market.
Despite its relentless rise, Supermicro stock currently trades for just 2 times next year's sales, the very definition of a bargain stock.
