Super Micro Computer's Stock Dips Once More: Is the AI Boom Over for This High-Flying Tech Share?
$Super Micro Computer(SMCI.US$, known for crafting high-performance server solutions, has significantly benefited from the AI industry. Recently, analysts at Rosenblatt have increased their price target for SMCI stock to $1300.
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," they wrote in a note.
However, during Tuesday's trading session, Super Micro Computer's share price experienced a downturn following the company's announcement of its intention to issue 2 million shares in a public offering. The move is seen as an effort by the company to take advantage of the substantial 252% increase in its stock value since the beginning of the year.
Additionally, Super Micro disclosed plans to grant Goldman Sachs, the sole underwriter and manager of the sale, an option to purchase up to an extra 300,000 shares within a 30-day period, according to its regulatory filing. Goldman Sachs will oversee the offering and any related dealings.
Why AI Stocks Plunged on Tuesday
The semiconductor industry saw stock price declines for $NVIDIA(NVDA.US$, Super Micro Computer, Inc., and $Advanced Micro Devices(AMD.US$ due to several concerns. Although Nvidia's stock closed up by 1%, it fell by 3% at the opening after the company unveiled its new Blackwell AI chips, receiving a mix of analyst reactions despite optimism about its technology and market position.
AMD's shares also dipped, reflecting worries about its valuation and a possible decrease in AI infrastructure investment, influenced by Nvidia's news. Super Micro Computer's shares took a significant hit following its announcement of a public share offering, which raised investor fears of share dilution, exacerbated by the timing soon after joining the $S&P 500 Index(.SPX.US$. The equity sale will raise capital to support "operations, including the purchase of inventory and other working capital purposes, manufacturing capacity expansion and increased R&D investments," the company said in a filing with the Securities and Exchange Commission.
Overall, the risk of a waning AI infrastructure boom, sluggish PC sales, and an oversaturated AI market looms over these companies, potentially leading to a "trough of disillusionment" for tech stocks if the high growth rates justifying their valuations do not persist.
Has the Hot AI Stock Already Peaked
In its latest quarter, Supermicro saw its revenue surge, doubling its earnings as it aims to maintain a competitive edge in the intensifying AI server market.
The Wall Street Journal featured a statement from Supermicro's CEO, Charles Liang, emphasizing the company's need for additional capital in response to robust demand. He highlighted the high costs associated with production, pointing out that the Nvidia chips utilized in their servers come with a hefty price tag of approximately $25,000 each, contributing to the expensive manufacturing process.
Despite a recent sell-off, Supermicro's stock has tripled over the year, though it has been subject to significant volatility, currently sitting around 30% below its March 8 peak. The stock's fluctuations are expected to continue, yet there is still potential for it to reach new heights.
Supermicro is aggressively positioning itself to compete with the likes of $Dell Technologies(DELL.US$ and $Hewlett Packard Enterprise(HPE.US$, leveraging its rapid growth and reasonable valuation to stay at the forefront of the AI server market. Bolstered by a strong partnership with Nvidia and an impending $2 billion investment, Supermicro is well-placed to maintain its market lead.
Source: Investopedia, Yahoo Finance, Investing.com, The Tokenist
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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