Why Super Microcomputer’s stock price rose 17.5% this week

stock super micro computer (SMCI 0.27%) The stock was up 17.5% as of Thursday’s close this week, according to data provided by S&P Global Market Intelligence. This follows encouraging macroeconomic developments and positive analyst comments on several industry peers.

The Rising AI Tide Lifts Many Boats

Super Micro Computer started the week strong on Monday, up 5%. This has been fueled by a combination of reports that Wall Street analysts expect the US Federal Reserve to implement extended interest rate cuts over the next few years.

U.S. central bank officials, who have raised interest rates at a historic pace over the past two years to curb inflation, are widely expected to cut interest rates six times by 0.25 percentage points next year alone. This makes sense for interest rate-sensitive growth stocks like super micros, which tend to look more attractive to investors compared to bond alternatives as interest rates fall.

Supermicro expanded its gains yesterday when Oppenheimer analyst Rick Schafer named several artificial intelligence (AI)-related chip stocks as his “best stocks” for 2024. nvidia, marvel technology, Broadcomand Monolithic power system. Investors tend to associate this optimism about these companies with impending strong results from Super Micro Computer, which uses Nvidia chips for GPU systems optimized for AI and machine learning.

What’s next for Supermicro Computer investors?

When Supermicro Computers last reported fiscal first-quarter results in November 2023, it easily beat Wall Street expectations. Judging by the timing of the previous report, the company should be planning to provide an update to shareholders in the second quarter of its fiscal year (ending December 31, 2023). ) later this month.

For perspective, most analysts are modeling fiscal second-quarter sales of $2.78 billion (up from $1.8 billion a year ago) and adjusted (non-GAAP) earnings per share of $4.52. Both estimates are well in line with the company’s own guidance for revenue of $2.7 billion to $2.9 billion and adjusted earnings per share of $4.40 to $4.88.

Whether Super Micro Computer meets, exceeds, or falls short of these estimates could determine the direction of its stock price in the near term. But in the meantime, investors are clearly excited about the company’s growth prospects, and the stock is responding in kind.