Were investors too greedy for AI stock Super Micro Computer today?

High-tech parts manufacturer super micro computer (SMCI 7.32%) It was a superstar stock for many investors on Tuesday.

At the start of the influential Consumer Electronics Show in Las Vegas, Supermicro was boosted by positive analyst ratings for it and other stocks related to artificial intelligence (AI). However, this raises the question of whether Supermicro deserves the more than 7% increase in its stock price as a result.

AI stock price rises due to recommended buy and target price rise

memo in OppenheimerRick Schafer reiterated the company’s buy recommendation for the star graphics card maker. nvidia. Schafer raised his price targets not only for Nvidia, but also for fellow AI-based stocks. marvel technology, Monolithic power systemand Broadcom. The four comprise analysts’ top AI picks for 2024.

Supermicro is not part of that group, but benefits from partnerships as a supplier to companies advancing AI technology.

This puts us in a good position, especially considering that AI is still in a relatively early stage of development. Many technology companies, large and small, are trying to find the edge in technology that can bring them revenue and profits, and they need the best hardware and solutions they can find.

Concerns about raising capital

In late 2023, Supermicro stock fell on news that the company was seeking to raise more than $500 million through a new stock offering. But in the rapidly expanding world of AI, $500 million is small change compared to what ambitious companies are spending to build AI apps and services. The market seems to be realizing that although this is an expensive game, Super Micro could be a significant winner.