One stock that's been a hotter buy than Nvidia this year is Super Micro Computer (SMCI +8.64%). Its 170% gains since January are better than the chipmaker's 145% returns over the same stretch. And that's with Super Micro's stock giving back some gains and coming down from highs it reached earlier in the year.
Artificial intelligence (AI) stocks, however, are still attracting a lot of attention from investors despite some recent bearishness in the markets. Can Super Micro's stock continue to surge in the latter part of the year, or should investors consider cashing out right now given its inflated valuation?
NASDAQ: SMCI
Key Data Points
Analysts still see a lot more upside
Wall Street analysts track businesses closely, and their price targets can give investors some insights into just how much near-term upside there may be for a stock. Those price targets focus on the short term, typically where analysts see a stock going in the next 12 months or so.
Currently, Super Micro has a consensus analyst price target of right around $1,000. If the stock rallies that high, then that means you could earn more than a 20% return from buying it today. The one caveat, however, is that there's a wide range in price targets for the stock based on who you ask. While some analysts have price targets well above $1,000, some see the stock climbing no higher than $800.
Price targets can change, but for the most part, there still appears to be a lot of excitement around Super Micro's potential.
Why the stock may not run out of steam just yet
A big reason why Super Micro may still do well in the latter half of the year is that the business is booming. When the tech company last reported earnings in April, it posted record numbers with net sales coming in at $3.9 billion for the first three months of 2024, which was three times the $1.3 billion it reported in the prior-year period.
The company is experiencing strong demand for its AI, cloud, and storage solutions. If it can build on those strong numbers, Super Micro's price targets could be due for some upgrades, and more money could pile into the stock.
Another catalyst that could help is its recent inclusion into the Nasdaq-100 index. The Nasdaq 100 features the top nonfinancial stocks that trade on the Nasdaq, and it's an easy way for investors to gain exposure to some of the best growth stocks in the world. With Super Micro now part of the index, that can lead to many more investors owning the stock, helping to drive up its value even higher in the months ahead.
Should you buy Super Micro stock?
By looking at the stock's returns this year, you might be tempted to think that Super Micro is due to run out of steam. But the stock trades at a fairly reasonable 22 times its estimated future earnings. Nvidia, by comparison, trades at a multiple of 45. There's still some good value in Super Micro. And unless the company's growth rate starts to stall in its upcoming earnings report, I wouldn't be surprised to see the stock continue to rise higher as the year goes on.
Trying to predict how high the stock might go is anyone's guess, but with strong demand for its products and services and a reasonable valuation, Super Micro may be one of the better AI stocks to own right now.
