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SMCI stock: Could Super Micro shares really add another 60%

Published 02/22/2024, 03:16 PM
Updated 02/22/2024, 03:16 PM

Shares of Super Micro Computer (NASDAQ:SMCI) continued their relentless ascent on Thursday, surging more than 35% during the session. The SMCI stock has had one of the most impressive starts to 2024 among tech stocks, gaining over 235% year-to-date, prompting many analysts to ask: Is the SMCI stock in a bubble?

SMCI stock price rally

Super Micro Computer, a US company that designs and builders high-performance servers, saw its share price jump more than 30% on Thursday, surging as high as $985 at one point during the session. 

At the time of writing, SMCI stock was trading at around $965.1, around 9.3% short of the all-time high it hit earlier this month.

Although many questioned the sustainability of its recent rallies, the AI-related stock continues to reward its investors, gaining a staggering 1,012% over the past year. 

The company has used the recent rally in its shares to announce that it will offer $1.5 billion of convertible senior notes, due 2029. 

Why is SMCI stock rallying?

It appears that the Thursday jump in SMCI’s stock price was driven by company-specific news.

However, speculations suggest the rally was driven primarily by a blockbuster earnings report from Nvidia (NASDAQ:NVDA), one of the primary catalysts behind the ongoing AI boom. 

Akin to previous reports, the chipmaker demonstrated remarkable growth yet again in the fiscal Q4 2024, with revenues reaching a record $22.1 billion, marking a 265% increase from the previous year. 

The company's profitability was also impressive, with adjusted earnings per share (EPS) escalating by 486% to $5.16. 

Moreover, Nvidia issued an optimistic guidance for the fiscal Q1 2025. It expects to hit $241 billion in revenue for that quarter, which would mark a year-over-year jump of 233%. 

Nvidia’s shares popped over 15% on Thursday to $778.15, while the broader S&P 500 added 2%. 

Although NVDA has been one of the primary drivers behind the widespread embrace of generative AI, Supermicro has quietly played a pivotal role in this trend.

Just like Nvidia's GPUs have been the driving force behind the computational capabilities powering the AI revolution, Supermicro's servers, designed specifically for AI applications, have also been significant in enabling a broad user base to leverage these advancements.

Hence the recent staggering gains in SMCI stock. 

Wall Street analysts see more upside for Super Micro shares

The Thursday surge in Super Micro’s shares comes just days after Rosenblatt analysts gave the stock a vote of confidence, hiking their 12-month price target from $700 to $1,300, implying 34% further upside from the current levels. 

At the time of the report release, Rosenblatt’s price target suggested an additional upside of 60% for SMCI.

Analysts attributed the upward revision to “continued momentum in AI computing.”

“Key to the story is for investors to consider that the company is benefiting not only from secular AI growth (over 50% CAGR over next several years) but material share gains,” said Rosenblatt analysts.

“We anticipate these gains to reach double digits in the next couple of years, up from the current mid-single digits, with a particular focus on enterprise,” he added.

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