Super Micro Computer (NASDAQ:SMCI) stock continues to climb, now up over 315% for the year-to-date. Shares of the server and storage vendor don’t seem like they are slowing down just yet. SMCI stock is now on the verge of breaking above $1200 a share.
Super Micro Computer is a specialized supplier of high-performance server and storage systems. It has longstanding partnerships with key artificial intelligence (AI) component suppliers, including NVIDIA Corporation (NASDAQ:NVDA), AMD (NASDAQ:AMD), and Intel (NASDAQ:INTC), which has helped transform it into a leading AI infrastructure company.
However, SMCI’s upward trajectory has prompted the burning question of which company is poised to replicate its remarkable success.
SMCI Stock Forecast After Rally
The company’s premium valuation has resulted in Goldman Sachs (NYSE:GS) taking a cautious view of the stock, initiating it with a Neutral rating and $941 price target in a research note earlier this month.
While the investment bank believes the company is an AI winner, it believes it is fairly valued. According to Goldman Sachs, the company’s position in the AI market helps to justify its stock's nearly 1,000% move since the beginning of 2023, but it notes that it trades largely in line with Nvidia.
“SMCI is very well-positioned to serve demand from AI CSP’s over the next few years, but serving enterprise AI infrastructure demand in the years after likely will be more competitive, particularly given more enterprise-focused IT hardware suppliers such as DELL and CSCO,” said the investment bank.
On the other hand, Argus recently initiated SMCI with a Buy rating and $1,350 price target, saying it is a "leading computer and server provider for the age of generative AI."
The firm noted SMCI is “experiencing accelerating revenue and particularly earnings growth as demand for its server and computing solutions expands rapidly."
"Despite the explosion in the stock price, valuations for SCMI have not soared out of sight," argues the firm. "Although the SMCI shares are not inexpensive, we believe prospects for near-term and long-term growth justify investment in the shares at current levels."
Which Computing Stocks May Break Out Next
Of course, the rise of SMCI has prompted questions about the next big stock market winner, with all eyes on the tech sector.
Bank of America (NYSE:BAC) highlighted SMCI, Dell Technologies Inc (NYSE:DELL), and Hewlett Packard Enterprise Co (NYSE:HPE) as companies directly benefiting from higher AI server demand, while they expect NetApp Inc (NASDAQ:NTAP), Pure Storage Inc (NYSE:PSTG), Western Digital Corporation (NASDAQ:WDC) and Seagate Technology PLC (NASDAQ:STX) to benefit from increased demand for storage driven by increased AI workloads.
They see artificial intelligence “driving most of the future growth in server revenues over the next 4 years” and model the “overall server market growing revenues double-digits (about 23% CAGR) between 2023-2027.”
AI workloads are set to drive server market growth above the historical rate, according to the bank.
Bernstein noted the recent commentary regarding the AI servers, also stressing that SMCI, DELL and HPE are stocks to watch in the space. They also said that most AI server volume is being manufactured by Taiwanese ODMs (Quanta, Wistron, etc.) who sell to Tier 1s, as well as Supermicro. OEMs like Dell (NYSE:DELL) and HPE are also participating in the market, largely selling to Tier 2s.
“We believe Supermicro has fared disproportionately well (vs. Dell and HPE) due to its integrated manufacturing capability (quick to market; configurability), lower cost structure, and early product availability and penetration of accounts,” said Bernstein analysts.
Assessing the potential bull case in the AI server market opportunity, they said: “Based on NVDA’s expected DC revenues, AI server revenues could be $160B or more in 2025, significantly larger than the total traditional CPU server market today. As AI moves to inferencing, more infrastructure will be purchased by corporates, allowing OEMs significant growth and margin opportunity.”
Elsewhere, in a note explaining its top AI/ML ideas for 2024, analysts at Baird said NVDA, AMD, AMGO, Qualcomm Incorporated (NASDAQ:QCOM), and SMTC (NASDAQ:SMTX) were its top names in the semiconductor components sector, while Adobe Systems Incorporated (NASDAQ:ADBE), Salesforce Inc (NYSE:CRM), Freshworks Inc (NASDAQ:FRSH), ServiceNow Inc (NYSE:NOW), Pagerduty Inc (NYSE:PD), PRO, Sprout Social Inc (NASDAQ:SPT), SWI, and Atlassian Corp Plc (NASDAQ:TEAM), are its top software and SaaS names.
Furthermore, Snowflake Inc (NYSE:SNOW), MongoDB (NASDAQ:MDB), Datadog Inc (NASDAQ:DDOG), Dynatrace Inc (NYSE:DT), and Apple Inc (NASDAQ:AAPL) are its top cloud software picks.
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