Super Micro Computer (SMCI -2.86%) stock has been a market darling over the last year. But that led to pretty high expectations heading into its most recent earnings report. While the report was solid in many ways, investors seemed to think the stock price had run too far, too fast, ahead of the report.
Supermicro stock plunged after the quarterly report and is lower for the week by about 8% as of Friday morning trading, according to data provided by S&P Global Market Intelligence. Yet shares of the provider of graphics processing unit (GPU) and storage servers have still soared by 625% over the past 12 months.
The AI supercycle
Supermicro has been riding what has become an artificial intelligence (AI) supercycle. Sales of the company's server and storage systems that are filling up quickly growing data center capacity have been soaring. In the first nine months of Supermicro's fiscal 2024 (ended March 31, 2024), sales of $9.63 billion nearly doubled from the comparable prior-year period.
Management expects that sales momentum to continue. It estimates that revenue in the current quarter will be 38% higher sequentially than the just-reported period at the midpoint of its guidance range.
But Supermicro isn't the only player in the market. Dell Technologies and Hewlett Packard Enterprise are also in what is somewhat of a commodity business. But supply and demand dynamics can lead to supercycles in any commodity.
Based on the unrelenting demand that Nvidia has been reporting for its leading GPU platforms for AI applications, this cycle could last for quite a while longer. Supermicro is the only real pure play in the segment.
The market reaction this week has given interested investors a good opportunity to try to play that booming cycle. But it might not be for everyone. Passive investors might not react well to the inevitable continued volatility. But for those who are highly involved, hands-on investors, it could be a good time to take a position in Super Micro Computer.
