Super Micro Computer's (SMCI +3.12%) stock performance over the past year has the attention of investors.
The company assembles computer servers for sale, many of which are used to power artificial intelligence (AI) applications. The explosion in demand for these servers helped it become one of the more notable companies (and stocks) in this space. Investors who bought in early have seen massive returns.
This is especially true of investors who bought in five years ago before the AI hype machine went into overdrive. Supermicro, as it is commonly known, is the latest example of how a critical technological breakthrough can completely transform a company (and its stock).
Supermicro's five-year performance
A $1,000 investment in Supermicro five years ago would be worth an eye-popping $42,460 today. That's an average annual return of 112%!
NASDAQ: SMCI
Key Data Points
But Supermicro has been around longer than five years. The company was formed in 1993 and took 14 years to launch its initial public offering (IPO) in 2007. In 2007, few investors had likely heard of Supermicro. Between the IPO in 2007 and 2019, the stock had its ups and downs, rising about 174%. By the end of 2019, it traded at $24 per share.
The company (and the stock) began to take off in the 2020s, with Supermicro stock jumping 240% from 2020 to 2022 and finishing the year at $82.10.The parabolic point came in 2023 when investors discovered that AI chips from Nvidia filled its servers. Since the beginning of 2023, the stock is up around 848%! And that's even after a 37% price drop since mid-March!
Despite its stellar stock price gains, the price-to-earnings ratio (P/E) is 45, surprisingly reasonable given the growth stock's price performance.
Supermicro is one of the stars of the current AI craze. The massive gains are a testament to its move from an unknown server company to a hot AI stock. Best of all, investors may not be too late. Strong investor sentiment and a relatively low P/E ratio suggest Supermicro could continue to produce returns the market can get behind.
