Prediction: Here’s where the Super Micro Computer is headed in 2025

Super Micro Computer (SMCI -0.77%) started this year strong. Earnings surged, and in the months that followed, the S&P 500 and Nasdaq 100 invited stocks to join. Stocks have outperformed even the market Nvidia. Shares are up 188% in the first half of the year, compared to Nvidia’s 149% rise.

But times have been tougher for Supermicro in recent weeks. A research firm short the stock issued a report alleging trouble at the company. Around the same time, in an unrelated move, Supermicro delayed filing its annual 10-K report. And more recently, The Wall Street Journal reported that the Department of Justice has launched an investigation into Supermicro.

All of this weighed heavily on Supermicro, sending shares down 25% since the brief report in late August. And that has the market wondering what’s next for this tech company. My prediction is that this is where Supermicro is headed in 2025…

Image source: Getty Images.

Supermicro’s earnings growth

Before we talk about my prediction, though, let’s take a look at a little background on Supermicro’s path so far. This tech company isn’t a new kid on the block, and instead has been around for more than 30 years, selling workstations, servers, and other equipment. Supermicro has steadily grown its revenue and become profitable over time, but earnings have really taken off in the past two years as the artificial intelligence (AI) boom accelerated.

SMCI Net Income Data (Annual) by YCharts

Companies building AI platforms turn to Supermicro for their data center needs — and Supermicro’s strategy has helped it become a winner, delivering a growth rate over the past 12 months five times faster than the industry average.

Why is the company so successful? Supermicro works hand-in-hand with leading chip designers throughout their development process so that they can immediately integrate their innovations into its products. Also, Supermicro’s “building block” technology — most products have common parts — makes it faster for the company to adapt a particular product to a customer’s needs.

All of this helped Supermicro achieve quarterly revenue this year that surpassed a full year of revenue as early as 2021. And given the projected growth of the AI ​​market — it’s expected to expand from $200 billion today to $1 trillion by the end of the decade – – Supermicro could continue to see revenue growth.

A brief report and other headwinds

Of course, the negative news of the past few weeks remains a headwind right now. Let’s consider the details. Hindenburg Research, in its brief report, alleged “glaring accounting red flags” and other problems at Supermicro. It’s important to note that Hindenburg has a short position in Supermicro, which means he will benefit if the stock goes down — and that makes it difficult for us to rely on Hindenburg for unbiased information. Supermicro also responded to the report, saying the claims were “false or inaccurate” and pledged to further address it at “the appropriate time.”

As for the delayed annual report, Supermicro talked about it further, saying it doesn’t expect any significant changes to its earnings numbers. That should ease investors’ minds.

Finally, regarding the potential Justice Department investigation, The Wall Street Journal cited people familiar with the matter — but an investigation has not been confirmed. And the one diary said spokespeople for Supermicro and the US attorney’s office declined to comment.

My prediction for 2025

With all that in mind, my prediction for Supermicro in 2025 is as follows. At this time, it is impossible to say whether the Department of Justice has launched an investigation. If it does, and if it finds problems, that could weigh on the stock — but only the magnitude of the potential problems would tell to what extent.

There are a lot of “ifs” there though, and I prefer to go with what we actually know so far. And what we do know is that Supermicro’s business has been strong in recent years, and demand from AI customers continues. In fact, these customers are now looking for cooling technology for their AI data centers — and Supermicro is a specialist. This could represent a whole new wave of growth for the company starting in 2025.

In addition, Supermicro, which reported a lower gross margin last quarter, aims to open a new factory in Malaysia later this year — a move that should reverse that trend by focusing on high volume and cost reduced.

So my prediction is that if the allegations about the company are not confirmed, Supermicro’s earnings and share price could rise in 2025. The average estimate on Wall Street is for an 87% increase in the next 12 months, and if the recent problems do not increase . gains traction, I think the stock could meet those expectations.

Does this make Supermicro stock a buy? Possibly — if you’re an aggressive investor. Otherwise, though, and especially if you’re a cautious investor, it’s important to note that the stock remains risky right now. And that means it’s probably a good idea to wait for further clarity on recent headwinds before picking up shares in this AI stock.