Why the Artificial Intelligence (AI) Super Micro Computer Stock Came Out This Week

Super Micro Computer (SMCI -2.08%) the stock has been crushed over the past six months. The server, storage and cooling systems supplier’s quotas for the massive data center build were cut in half during this time.

But the stock is still up more than 60% year-to-date on strong demand as major tech companies work to rapidly expand artificial intelligence (AI) computing capacity. This week, stocks have started to bounce back from the recent slump and are up about 13% as of Thursday afternoon, according to data from S&P Global Market Intelligence.

The AI ​​business is booming

After surging in early 2024, Supermicro shares began to fall after a report by short seller Hindenburg Research claimed to have found “egregious accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures and customer problems’. Hindenburg noted that he had a short position in the stock. Shares fell further after Supermicro said it was delaying the filing of its annual 10-K report for the 2024 fiscal year ending June 30.

But since then, CEO Charles Liang said in a letter to clients that the company does not anticipate any material changes to previously published financial reports and that the business remains on track. He assured customers that the engineering, production and sales of its large-scale AI solutions were not affected.

As a result this week, along with the company introducing a new liquid cooling product, it revealed that it is currently shipping. NvidiaIts GPUs (graphics processing units) at a rate of over 100,000 per quarter.

Nvidia’s Blackwell chips are expected to cost at least $30,000, which translates into billions in quarterly sales for Supermicro. This could mean that Supermicro’s revenue growth continues to beat expectations in the coming quarters. That’s why investors also jumped back into stocks this week.

But investors will also want to monitor profit margins. Gross profit margin of 11.2% fell from 17% year-over-year in the fiscal Q4 period ended June 30. If this decline continues, this week’s rally in stocks may not last.