When many people think of artificial intelligence (AI) giants, they think of the chipmakers that power AI models. And these companies — such as Nvidia – saw their profits and shares take off. But a player behind the scenes has also generated enormous growth, thanks to the AI ​​boom. I’m talking about Super microcomputer (NASDAQ:SMCI)a manufacturer of servers, storage systems, hyperscale solutions and other key elements needed in data centers.
The company has been around for more than 30 years, but its profits began to take off a few years ago when customers began launching AI programs and realizing the benefits of investing in Supermicro’s products. The company recently announced its $3 billion first quarter, bringing in more revenue in three months than in a full year as recently as 2021.
Due to soaring demand and profits, the stock price followed, climbing more than 2,300% in three years. What could be next for this established player that has found a whole new source of growth through the demand for AI? My prediction is that Supermicro could take inspiration from Nvidia, and this will be the company’s next big move.
The Supermicro problem
First, this move could solve a particular problem that Supermicro is currently facing. It’s great that the stock went up, but that move left it trading at over $800 today. A few months ago, the shares even exceeded $1,000.
Often, these levels make it difficult for a wide range of investors to access the stock. Yes, you could buy fractional shares, but some brokerages do not offer them. And in some cases, investors prefer to own a whole share rather than go the fractional share route.
Finally, the $1,000 level can represent a psychological barrier. Even if a stock is cheap a valuation perspectivesome investors will view it as too expensive.
Nvidia has found itself in a similar situation, with its shares surging above $900 as of late. In response to this, the company announced a stock split last week. Its objective is to facilitate the purchase of shares for employees and investors.
Stock splits do not change the overall market value of a company or the value of your investment. Instead, they offer current holders more shares, which reduces the value of each individual share. This way, new investors can buy the shares at a lower price.
Following Nvidia’s lead
I predict that Supermicro will follow Nvidia’s lead and the company’s next big move will be the announcement of a stock split. Supermicro has never split its shares before, but that doesn’t mean it’s opposed to doing so. Before the surge in demand for AI, Supermicro shares were trading at much lower levels – around $80 at the end of 2022 – so there was no need to initiate a split.
Today, however, a stock split would make sense. First, as mentioned, it would help a wider range of investors add Supermicro to their portfolios. Second, it would indicate that the company is confident about its future and believes that the stock could start from a lower level and take off again.
Supermicro recently talked about record demand for its rack-scale AI systems – those that incorporate chips from leaders such as Nvidia, IntelAnd Advanced microsystems. As these players continue to release new, more capable chips, Supermicro will release products incorporating these chips – and this should continue to generate revenue.
In fact, Supermicro recently stated that it expects demand for AI to continue for several years. So now would be the perfect time to bring the price of each individual stock down to a level that would attract more and more investors.
I predict this will be Supermicro’s next big move. However, whether that happens or not, the stock is still a leading tech buy today, thanks to the company’s strong growth of late and its bright future prospects.
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Mad Motley has a disclosure policy.
Prediction: This will be Super Micro Computer’s next big move was originally published by The Motley Fool
