Super Micro Computer (SMCI 8.89%) has been one of 2024's hottest artificial intelligence (AI) stocks. The server specialist's share price is up 260% year to date, and some Wall Street analysts anticipate that surging demand for AI solutions will continue to push the stock higher.
On March 25, JPMorgan analyst Samik Chatterjee initiated coverage on Super Micro with an overweight (buy) rating. Chatterjee put a one-year price target on the stock of $1,150 per share, or 12% higher than the stock's closing price on Mar. 26.
Super Micro's position in AI servers could power significant growth
Chatterjee sees Super Micro as the top company in the AI server market -- a category that's playing an increasingly important role in pushing the AI revolution forward. The company's high-performance rack servers make use of Nvidia's graphics processing units (GPUs) and other processors to provide a comprehensive solution for customers who are looking to quickly launch data-processing capabilities for AI.
Thanks to the computational demand related to training large language models and other AI applications, Supermicro has seen its sales and earnings grow at an incredible pace. In the company's fiscal 2024 second quarter (ended Dec. 31), revenue soared 103% year over year to $3.66 billion. Non-GAAP (adjusted) earnings for the period jumped 72% to $5.59 per share.
Ultimately, Chatterjee expects Super Micro to maintain leadership over its corner of the server market with a 10% to 15% share. The company's custom-built server solutions and fast time to market are key competitive advantages. If his prediction proves correct, the company should continue to see demand ramp up as companies launch and scale data centers built for running and distributing artificial intelligence applications.
