Looking back from where it was four years ago, Super Micro Computers (NASDAQ: SMCI) has definitely emerged as a formidable player in the AI sector. Since stepping into the AI ring, their valuation and stock has skyrocketed by continuously challenging other industry giants like Nvidia and Taiwan Semiconductors.

But as I accidentally overcooked my 4th of July hamburger only to find it still juicy and full of flavor underneath its “well done” shell - it made me think of something: Despite concerns about $SMCI’s high valuations, and overbought warnings from analysts…

(Source: Nasdaq) 

I’ve decided to jump on here to remind everyone that even though most believe Nvidia is the only AI blue chip worthy of a soaring stock price  - Super Micro Computers is not only up 196% year to date, but it too is still juicy with more legs to run going into 2025. 

(Source: Google Finance) 

You see, we all know the AI industry is booming. In fact, for the most part I get tired of writing about it… but hey it’s what the people want right? Plus, AI is “revolutionary”, so yeah there’s that.  

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But while Nvidia often steals the spotlight, Super Micro Computers is still right behind making significant strides right along with it. With a near 200% increase in its stock price during the first half of 2024, Super Micro has not only demonstrated its capability to compete with the best, but it’s still proven to gain the attention of other critical tech players like our homeboy Elon Musk. Shocker… 

If you haven’t seen it yet, Super Micro’s CEO, Charles Liang, recently shared a photo with Elon Musk at his new xAI data center, showcasing their joint efforts in developing advanced liquid cooling technology. 

 

(Source: X) 

However, this collaboration isn’t just a PR move; it’s a step forward in making AI data centers more efficient and environmentally friendly. The partnership revolves around Musk’s xAI project where he’s already invited Dell to play a major hand in building it. 

But in typical Musk fashion, why not invite more big players to the high stakes poker game eh? 

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The project already had Dell building one half of Musk’s new revolutionary center but now SuperMicro is officially building the other half (once again solidifying it’s vital place in the industry). 

But as mentioned, there are some concerns when it comes to Super Micro. Specifically from analysts who believe it’s valuations are high, while the market overall has yet to agree. Simply put, investors remain bullish partly due to the company’s impressive return on capital employed (ROCE), which stands at 16%, double the tech industry average. 

(Source: Simply Wall Street) 

This indicates that Super Micro is not only growing but also generating substantial profits from its investments. So yeah, best of both worlds? I think so, my friend.

It’s one thing to say you’re growing, but it’s another to actually generate cold hard cash from your growth. Think, walking around with huge arms on the beach but not having the strength to carry your chairs back to the car. Stupid example but you get the point. 

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But still if analysts are concerned, then they are probably right… right? Well not so fast. Looking even deeper into the numbers, Super Micro’s financial performance in the first nine months of fiscal 2024 has been nothing short of impressive. Net sales reached $9.6 billion, a 95% increase from the previous year, while net income grew 92% to $855 million. 

Despite its rapid growth, the company’s forward P/E ratio of 36 suggests it remains more affordably priced compared to some high-flying tech giants. Which kind of flies in the face of “high valuation” warnings. 

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Meaning, if Super Micro keeps up the good work going into their next earnings that’s scheduled in August… the potential for further stock price appreciation remains likely. Again, not a certainty… just likely. Big difference. 

Now in addition to the better than average numbers Super Micro has tucked in their pants, the options market gives us even more hints regarding the market’s thoughts on this AI titan.  

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According to key experts, recent trading activity has shown favorable bullish sentiment, with significant bets totaling around $680,000 targeting $SMCI strike prices around $1,000. So in plain english, this indicates that even the market’s heavy hitters are expecting more room stock prices to run in the future.  

But remember, stock prices simply relate to the underlying role of the company it’s tied to. And right now, Super Micro’s isn’t just about AI servers. The company is also involved in cloud computing, Big Data, and the Internet of Things (IoT).

(Source: Yahoo Finance) 

 Its modular architectural approach allows for rapid development of customized solutions, catering to a diverse range of technological needs. With revenue coming from the US, Europe, and Asia, Super Micro has a broad and diversified market presence. 

So the company definitely has its hands in quite a bit of cookie jars. Plus, with Elon’s attention, it does add an extra layer of attractiveness to Super Micro. While the partnership with xAI will likely become a significant growth driver, Musk has a fanboy audience that rival’s Taylor Swift’s “swifties”. 

(Source: Youtube) 

Anything that man does or says is basically god given to his followers, and if Super Micro has his attention… They also have the attention of his degenerate tech nerds. (Myself included). 

So what’s the takeaway on this beautiful July 4th afternoon? 

Well it’s simple: Super Micro Computers is not just riding the wave of the AI boom; it’s actively shaping the industry’s future right alongside the Nvidia bandwagon. 

(Source: Giphy) 

With robust financials, strategic partnerships, and a knack for innovation, Super Micro continues to impress. So as we resume trading tomorrow, it might be worth the extra brain space you have to see if this AI bluechip deserves a spot (or added shares) in your portfolio. 

But as I always say, what in the actual heck do I know right? I literally thought about Super Micro Computers when I realized I failed at making a simple hamburger. So if that doesn’t tell you my faults… then I don’t know what will. 

Stocks.News has positions in Dell as mentioned in the article.