This split stock just ran into trouble. Here’s why it’s still a buy.

Super Micro Computer (SMCI 3.40%) posted a fantastic first half of the year. Thanks to customer demand for artificial intelligence (AI), in just one quarter, the company achieved sales that surpassed what it had previously generated in an entire year, even in 2021. S&P 500 and Nasdaq-100 even welcomed this 30-year-old technology company to join. And Supermicro’s share price reflected all this good news, rising 188% to outperform the market darling Nvidia.

In fact, the stock has soared — peaking above $1,100 earlier in the year — that in August the company announced a stock split planned for later this month. This type of operation involves issuing additional shares to current holders to reduce the price per share, opening up the investment opportunity to a wider range of investors.

But in recent weeks, the story has lost its luster. A short report from Hindenburg Research that claims Supermicro’s problems have hurt the stock — it’s down 16% since the report was released in late August. Separately, Supermicro delayed filing its annual 10-K report, another item that weighed on the stock. Despite these challenges, Supermicro still makes for a great buy right now. Let’s find out why.

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Hindenburg’s brief position

First, let’s consider the bad news. In his report, Hindenburg alleged “glaring accounting red flags,” “evidence of undisclosed related party transactions” and other potential problems. But it’s important to keep one thing in mind. Hindenburg has a short position in Supermicro, which means it will benefit if the stock falls. This bias makes it difficult to rely on Hindenburg as a source of information about the company.

Another point to note is that Supermicro has addressed the report, saying it “contains false or inaccurate statements.” So I wouldn’t base my decision whether to buy or sell Supermicro on the Hindenburg report. Instead, it’s better to consider what we know, such as the company’s path so far, details from recent earnings reports and market potential.

I mentioned that Supermicro has been around for a while, but it’s only in the last few years that its earnings have really taken off. That’s because AI customers are busy building their data centers and rushing to Supermicro for workstations, servers and other products.

Supermicro’s strategy

Why Supermicro? The company is able to quickly build products to suit the customer’s needs, including the latest technology. This is because Supermicro uses building block technology, which means that its products contain a lot of common parts. Supermicro also works closely with top designers to integrate their new releases into its products immediately.

This has helped the equipment maker achieve record revenues in recent quarters. Additionally, Supermicro may be at the start of a new big growth opportunity thanks to its ability to solve a big problem with today’s AI data centers: heat build-up. Supermicro makes direct liquid cooling (DLC) elements to handle this and sees the demand here becoming. The company estimates that 25% to 30% of new data centers will use this technology in the next 12 months, and Supermicro will dominate the market.

With the AI ​​market expected to reach more than $1 trillion by the end of the decade, it’s clear that heat could become an issue — and Supermicro could see a huge wave of growth thanks to its DLC expertise.

Finally, Supermicro recently said that while it is delaying its 10-K filing, it doesn’t expect any major changes to its fourth quarter or fiscal year results. This is another item that should ease our minds.

So Supermicro gives us a solid track record, a strategy that sets it apart, and potential for growth going forward. Additionally, recent headwinds have sent the stock into very cheap territory at just about 13x forward earnings estimates. And that’s why now is a great time for long-term investors to consider buying shares of this company that could be headed for a whole new wave of growth.