Super Micro Computer (SMCI 1.08%), better known as just Supermicro, has been one of the more volatile artificial intelligence (AI) stocks to own over the past few years. Since 2023, it has risen by 300%, and that's even after giving up some significant gains in the second half of 2024 over concerns about its financial reporting and problems with its auditor.
With those issues seemingly resolved now and Supermicro's stock trading at a reduced valuation, is the stock a rally candidate going forward? Could the stock price go so far as to double within the next five years, given all the hype surrounding AI?
NASDAQ: SMCI
Key Data Points
Supermicro still sees a lot of growth ahead
With the feverish spending on AI by tech companies, Supermicro saw its business take off. By providing companies with servers and the infrastructure they need to carry out their AI ambitions, Supermicro significantly benefited from the surge in AI-related spending. Although its growth rate has slowed down, it was still more than 50% in its most recent quarter, which covered the last three months of 2024.
Data by YCharts.
For fiscal year 2025, which ends in June, Supermicro anticipates full-year revenue between $23.5 billion and $25 billion. And the following year, it sees more growth ahead, with its top line hitting $40 billion. With so much more growth ahead, it's not hard to see why Supermicro stock may be poised to rally.
Its low valuation could set it up for big gains
Shares of Supermicro tanked last year as concerns about accounting issues and the legitimacy of its financial statements weighed on the AI stock. To help resolve the issues, the company ended up changing auditors and was late on reporting quarterly and annual financial reports.
While it did rally after seemingly putting those issues to rest, Supermicro stock hasn't fully recovered. The stock price remains down by 65% from all-time highs. Investors remain nervous about trusting this once-exciting AI stock again. As a result, the stock is trading at a fairly low price-to-earnings multiple just below 14 -- down significantly from the premium investors were paying for it in the past.
Data by YCharts.
At such a reduced earnings multiple, it could have a lot of upside, and it arguably contains a good margin of safety should the business run into challenges, especially amid troublesome economic conditions, including tariffs and ongoing global trade wars.
Is Supermicro stock worth buying today?
Supermicro stands to benefit from an increase in demand for AI-powered products, and it now has data centers that use Nvidia's new Blackwell chips.
If you're bullish on AI, this may be a good time to consider buying Supermicro stock. Its valuation has fallen significantly over the past year, and with much more growth still ahead, it can generate significant returns for investors who take a chance on the business today.
There are still risks here, including a possible slowdown in AI spending if a recession takes place and companies reevaluate their investments in tech. But with accounting-related concerns seemingly out of the way and AI spending likely to remain high in the future, Supermicro looks like a stock that has the potential to double in value within the next five years, and it could make for a great buy right now.
