Super Micro Computer (SMCI +0.41%) stock fell in Thursday's trading. The server specialist's share price closed out the daily session down 3%, according to data from S&P Global Market Intelligence. The stock had been up as much as 11.3% early in the day's trading.
NASDAQ: SMCI
Key Data Points
While there wasn't any business-specific news powering Supermicro's initial gains today, investors poured into the stock following Nvidia's (NVDA +1.67%) strong first-quarter results. But bullish momentum receded, and the gains didn't hold.
Volatility hits Supermicro stock after Nvidia's Q1 report
Supermicro purchases graphics processing units (GPUs) from Nvidia and uses them as key components in the servers that it sells. These servers have been in high demand as companies have moved to rapidly deploy and scale artificial intelligence (AI) software.
Nvidia reported first-quarter results after the market closed yesterday and once again posted results that crushed the market's expectations. The AI leader reported non-GAAP (adjusted) earnings per share of $6.12 on sales of $26.04 billion. Meanwhile, an average of analysts surveyed by the London Stock Exchange Group had suggested that the business would post adjusted earnings of $5.59 per share on sales of $24.65 billion.
Nvidia has become the clearest and most intensely monitored bellwether for the state of the AI industry. The company's high-performance GPUs are the foundational hardware that has helped pave the way for the creation and scaling of today's most advanced and most popular artificial intelligence software. Some investors may have been expecting Nvidia's results to drive a bigger pop for Supermicro stock, and it looks like a sizable number of shareholders opted to take profits as momentum started to waver.
After a massive run, is Supermicro stock still a buy?
Super Micro Computer stock has skyrocketed roughly 414% over the last year even after today's slight pullback. With the stock currently trading at roughly 36 times this year's expected earnings, some solid growth is already priced into the server specialist's share price.
On the other hand, the business has also been serving up stellar sales and earnings growth. There are also good reasons to think that the artificial intelligence revolution is still in very early innings.
For risk-tolerant investors seeking long-term plays in the AI space that still have the potential to deliver strong returns, I think that Supermicro stock is still a worthwhile buy. The potential for competitive and macroeconomic pressures to create valuation volatility is certainly here, but the company has strong tailwinds at its back.
