Super Micro Computer Stock Surges on Monday Morning

Super Micro Computer Stock Surges on Monday Morning

The stock of Super microcomputer (NASDAQ:SMCI), also known as Supermicro, continued its meteoric rise to kick off the week. It jumped 10.3% Monday morning, and as of 11:59 a.m. ET today, the stock was still up 9.1%.

The catalyst that sent the artificial intelligence (AI) The server maker rose on bullish coverage from two Wall Street analysts.

A growing upward trend

The first bullish comment comes from J.P. Morgan analyst Samik Chatterjee, who initiated coverage with an overweight (buy) rating and a price target of $1,150. This suggests an 18% upside potential from Friday’s closing price.

The analyst noted that Supermicro is “the leading company in the AI ​​compute market” and he expects strong demand driven by accelerated AI adoption to continue.

Not to be outdone, Northland analyst Nehal Chokshi increased his price target to $1,300, for an upside of 34%, while maintaining stock outperformance. The analyst called Supermicro a “leader in branded server market share” and estimates the company is on track to have a 16% share of the generative AI server market, which his company estimates to be 560 billion dollars.

Demand that is accelerating

Since much of generative AI is processed in data centers, the resulting upgrade cycle is booming and expected to continue. Bernstein analyst Toni Sacconaghi predicts that the AI ​​server market will grow 75% annually over the next three years, saying this growth is “unprecedented.”

Additionally, Supermicro continued to gain market shares at the expense of its larger rivals, in part through collaborations with the biggest AI chipmakers, giving the company early access to the most in-demand processors.

The stock has been on fire, rallying over 1,200% since the start of last year, and is up 276% this year alone as of this writing. Despite its parabolic rise, it remains surprisingly affordable, selling for less than three times next year’s sales.

During the company’s second quarter of fiscal 2024 (ended Dec. 31), Supermicro’s revenue soared 103%, while earnings per share jumped 71%, despite heavy capital spending to increase its production. Given this growth, I don’t expect Supermicro shares to stay this cheap for long.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Super Micro Computer. The Motley Fool ranks and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

Why Super Micro Computer Stock Is Higher Monday Morning was originally published by The Motley Fool

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