Super Micro Computer Inc (NYSE: $SMCI) is a leading provider of server and storage solutions in the US. Based in San Jose, CA, Supermicro has emerged as an important player in the budding AI server industry.
On Wednesday, May 15, 2024, Supermicro was one of the day’s biggest gainers, rising over 15% at the close of trading. The rise came despite the lack of any significant announcement from Super Micro Computer’s management.
Below are some of the likely reasons why Supermicro was surging on Wednesday.
The Recent Morgan Stanley Report on Dell
Morgan Stanly recently issued an upbeat forecast for Dell. The investment bank forecast that Dell Technologies could build up to 50,000 AI servers in 2024. However, some sources signal that Dell could build up to 60,000 servers.
Dell and Super Micro are rivals in the server industry. However, given that the AI server sector is still in its infancy, any positive news on the sector will have a positive impact on notable players in the industry. According to the Morgan Stanley report, Dell is on course for $10 billion in server revenue, while Supermicro is expected to generate $14.9 billion in sales for fiscal 2024.
AI Product Launch
Various generative AI products have been launched since the start of the week. These launches are an important signal of actual demand for AI products. Without the mass adoption of AI products, the entire AI industry could collapse due to a lack of revenue.
On Monday, OpenAI launched ChatGPT-4oT, the latest version of their ChatGPT generative AI. It is much smoother, faster, and more capable than previous models. On Tuesday, Google began the I/O event with AI products featured in almost all segments. Such launches demonstrate demand, which is good for the overall industry.
All the new AI features require powerful AI servers to run, and with demand slightly outpacing supply, this is having a positive impact on all firms working on AI servers.
Positive CPI Data
A CPI report on Wednesday, May 15, revealed that inflation was easing. As inflation eases, the Fed could lower interest rates. Lower interest rates cut financing costs for significant purchases like AI servers, widening the potential market for Super Micro.
The positive CPI data led to an overall positive performance for the markets, with the NASDAQ closing 1.40% higher on Wednesday, while the SPX gained 1.17% on the same day. Meanwhile, the DJI ended the day 0.88% higher.
Super Micro Stock Performance
Super Micro closed trading on Wednesday, May 15, 15.81% higher at $952.36 per share. The stock has had a great run this year, rising 233.63% YTD. Over the past 52 weeks, it is up a whopping 553.02%, outperforming the 26.44% gain of the SPX. On Thursday morning, some of the gains from the previous day disappeared, with the stock falling 2.38% as of 09:31AM EDT to $931.26.
Its 52-week range is a high of $1,229 and a low of $155.45. It is currently above a key indicator following Wednesday’s rally: the 50 DMA of $929.09. Additionally, the stock broke above the top Bollinger Band.
Breaking above the two key technical indicators could signal that the next psychological price level of $1000 is within reach. A move past that level could trigger a race to a new 52-week high for the stock.
Analysts’ Outlook on SMCI Shares
Stock analysts are cautiously optimistic regarding the future of SMCI stock, giving it an overall moderate buy rating. They forecast a wide range for the stock, with a high of $1500 and a low of $800. Their average price target of $1,118 is a 17.39% upside based on the most recent price.
Should You Add Super Micro to Your Portfolio?
The recent positive assessment from Morgan Stanley on Dell’s AI servers and positive inflation data were essential catalysts for Supermicro stock. Additionally, continued penetration of AI products will be an important long-term factor for revenue growth.
Based on analysts’ forecasts and the current trajectory of SMCI stock, adding it to your portfolio could potentially pay off in the medium and long term.
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