Where will Supermicro Computer stock be in 5 years?
This computing hardware company is a lot less interesting than it used to be.
In a technology sector full of hype and extreme valuations, you may be drawn to the following trends: value stocks It trades at a relatively low multiple of earnings and revenue. Investing in these types of companies can help you base your portfolio on realistic expectations.
That said, some stocks are cheap for a reason. super micro computer (SMCI +1.96%) It’s a great example of that category.
With a price-to-sales multiple of just 0.99 and a forward price-to-earnings ratio of 17.4, this data center hardware company may seem like an affordable alternative to technology industry leaders such as: nvidia. After all, both companies provide services. pickaxe and shovel On the AI industry side, it provides hardware that other companies use to power advanced software.
However, there are a number of deep differences between the two companies that explain their vastly different performance, and this is likely to continue over the next five years.
today’s change
(1.96%)$0.68
current price
$35.37
Key data points
market capitalization
$21 billion
work range
$34.72 -$35.88
52 week range
$25.71 -$66.44
volume
21M
average volume
29M
gross profit
10.08%
dividend yield
Not applicable
Why is Supermicro showing such strong buying momentum?
After OpenAI publicly launched ChatGPT a few years ago, Supermicro’s stock experienced a legendary rebound, rising more than 1,000% to an all-time high of $119 in March 2024. The company was a direct way to bet on the AI data center construction boom because it turns GPUs, CPUs and memory chips made by other companies into ready-to-use computer servers.
Supermicro also focuses on energy-efficient designs and liquid cooling systems to manage heat. This is especially important for servers deployed for power-hungry use cases such as training and execution. Large-scale language model (LLM).
But in August 2024, the stock began to decline after short-seller Hindenburg Research published a worrying report accusing Supermicro executives of accounting fraud, sanctions evasion, and self-dealing. Soon after, the company delayed filing its fiscal 2024 annual report, and its auditor resigned, citing a reluctance to engage with the tech company’s financial statements.
As bad as the situation was, these issues also seemed like a buying opportunity because they had little to do with the company’s core business of selling computer servers. Moreover, in December 2024, an independent special committee formed to investigate the allegations found no evidence of fraud by Supermicro.
However, the first quarter fiscal 2026 earnings report delivered last month completely overturned the purchase argument.
Why did you lose interest in Supermicro?
While most analysts have now focused on Hindenburg Research’s claims of controversial accounting irregularities, short sellers have also mentioned other issues that seem increasingly relevant at the moment. Chief among them is competition in the server market, which they claim will soon be flooded with hardware from low-cost Taiwanese competitors willing to sell servers for 200,000 won. gross margin Lowest 4.1%. thatThis is significantly lower than Supermicro’s 12-month trailing margin of 14.1% at the time of the report.
Image source: Getty Images.
Historically, Super Micro has maintained impressive gross margins, which suggests that customers are willing to pay a premium for its servers. However, the results for the first quarter of the fiscal year economic moat It’s fading. For the period ended Sept. 30, net sales fell about 15% year-over-year to $5.02 billion, which is surprising considering the demand for data center hardware. For context, Nvidia, which has a long-standing deal with Super Micro, saw its revenue rise 56% year over year.
Since Supermicro’s business model involves packaging Nvidia’s GPUs into client-ready servers, the difference in peak performance suggests that the level of competition in the server space may be fiercer than expected. Moreover, Supermicro’s gross margin fell to 9.3% from 13.1% the previous year.
Where will Supermicro stock be in five years?
If there’s a silver lining to Supermicro’s situation, it’s its valuation. Trading at a forward price-to-earnings multiple of 17.4, the stock is still considerably cheaper than its share price. S&P 500‘S The average is 22. However, it is difficult to be excited about the long-term potential of data center equipment suppliers that fail to grow amid the massive data center boom. The next five years will be difficult, and it is very likely that stocks will underperform the market.
