Super Micro Computer has announced a stock split. But there’s an even better reason to buy right now.

Stock splits have been quite common among companies associated with artificial intelligence (AI). That’s because they’ve performed so well over the past year and a half that their stock prices have reached a level where a split is a good idea.

A company that recently joined this club is Super Micro Computer (SMCI 1.39%)known as Supermicro. It announced a 10-for-1 stock split effective Oct. 1 that will take its stock price from about $630 to $63 a share.

While the stock split is exciting news, I think there’s an even better reason to buy the stock now before the split.

Its data center products were in high demand

while Nvidia might get all the headlines because it’s associated with the AI ​​infrastructure being built, many more companies benefit from the same tailwinds. Supermicro is one of them, as its products, from data center hardware to full racks, are in high demand.

While many companies offer similar products to Supermicro, they stand out from the competition for two reasons. First, Supermicro servers are highly configurable and can be tailored to fit any size workload. Second, Supermicro servers are more energy efficient than the competition, which is an important consideration because energy input costs are significant over the life of the server.

These advantages have caused Supermicro’s revenue to explode over the past year, and more growth is set to happen.

SMCI Revenue Data (Quarterly) by YCharts

Looking to the first quarter of fiscal 2025 (ended September 30), management expects revenue of $6 billion to $7 billion, ranging from 183% to 230%. For fiscal year 2025, revenue of $26 billion to $30 billion is anticipated, which would represent growth of 74% to 101% year over year.

This is significant progress and a huge reason to invest in the stock right now. At the end of fiscal 2023, Supermicro had a long-term annual revenue target of $20 billion. And at the end of the second quarter of fiscal 2023, that target was just $10 billion.

Clearly, this market is expanding rapidly, and the appetite for Supermicro products is growing with it. However, that target was raised again in its latest results to a staggering $50 billion in annual revenue. That’s a massive upside to its current projections, and I think it’s a phenomenal reason to own the stock, as Supermicro has consistently hit its long-term goals.

However, after the Q4 2024 earnings announcement, the stock fell 20%. That seems like an odd reaction, but that’s because another important measure saw weakness.

The stock price is quite cheap compared to peers

While revenue growth is important and grabs the headlines, investors also need to see rising profits. Supermicro’s margins declined in Q4 due to new product launches, and this weakness is expected to last through most of fiscal 2025. However, this decline is short-sighted thinking, as if Supermicro is to recover its margins by at the end of fiscal year 2025, it will represent a massive value opportunity.

SMCI PE Ratio data (before) by YCharts

The stock is currently trading at 18.4 times forward earnings. Compared to most stocks in the market, this figure is quite cheap. It also indicates a 72% increase in earnings over the next year.

Supermicro’s management has already projected 74% revenue growth on the low side, so its earnings would have to remain at this lower level for the full year for the current valuation to make sense.

This disconnect represents a strong buying opportunity for the stock, and a patient investor could see a nice return on an investment if Supermicro’s margins recover over the next year.