Shares of Super Micro Computer (SMCI 0.30%) sank 13.5% in December, according to data from S&P Global Market Intelligence. As an assembler of advanced computer chips for data center providers, the company has been a beneficiary of the artificial intelligence (AI) infrastructure boom, which has recently turned pessimistic and driven some share prices downward.
Super Micro Computer stock has increased by nearly 1,000% over the last five years, but has declined by over 12 months. Here's why it fell again in December.
NASDAQ: SMCI
Key Data Points
Reliant on AI datacenter spending
Everyone is familiar with the major AI computer chipmakers, such as Nvidia and Advanced Micro Devices, as well as the cloud companies building data centers, including Amazon and Microsoft. Super Micro Computer sits in the middle of these customers, helping to take advanced computer chips and assemble them into supercomputers, along with accompanying power supplies and cooling technologies that can be plugged into data centers.
This has been a boon in recent years, with revenue up to $21 billion over the last twelve months. However, growth has begun to slow in recent quarters. Some of this is due to waiting for new Nvidia products, which Super Micro Computer believes will lead to $36 billion in revenue this fiscal year. Other reasons may be a slowdown in data center buildouts.
Concerns have arisen regarding the pace of AI infrastructure development by start-ups like OpenAI or Anthropic, which power much of this industry. Stocks such as CoreWeave -- along with Super Micro Computer -- have tumbled in recent months on these concerns. If there is an oversupply of computer chips on the market for AI datacenters, demand for Super Micro Computer's services as a middleman could dry up.
Image source: Getty Images.
Buy the dip on Super Micro stock?
When looking at Super Micro Computer's market cap of $18 billion, the stock may look cheap vs. its fiscal year 2026 revenue projection of $36 billion. However, as a middleman, it only achieves a slim gross profit margin of around 10%-15%, leaving little room for bottom-line profitability and cash flow generation.
Over the last twelve months, Super Micro's net income was just under $800 million, giving it a trailing price-to-earnings ratio (P/E) of 24. Again, this may appear inexpensive due to Super Micro's projections for revenue growth this fiscal year, but investors are also concerned about a potential downcycle in computer chip and data center spending, which could harm Super Micro Computer's business.
This is a risky stock to buy for 2026.
