Technology Sector Ideas

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Super Micro - >>> Move over, Nvidia. Investors are obsessed with this AI stock you may never have heard of


by Krystal Hur

CNN

Mar 7, 2024


https://finance.yahoo.com/news/move-over-nvidia-investors-obsessed-123045939.html


Nvidia isn’t the only stock capturing the attention of AI enthusiasts these days.

Nvidia is undoubtedly the poster child for artificial intelligence. Shares of the American chipmaker have soared roughly 277% over the last 12 months, helping drive a powerful bull market that’s led stocks to record highs. Nvidia closed above a $2 trillion market cap on March 1, joining an elite cohort including Apple and Microsoft.

But there’s another AI-related stock that has quietly logged eye-popping gains.

Shares of Super Micro Computer (SMCI) have surged about 296% so far in 2024, following a 246% jump in 2023. Supermicro’s stock gained even more momentum in January, after the company reported second-quarter results that blew past expectations and raised its full-year revenue forecast.

Supermicro’s stock was one of the most popular names bought by Charles Schwab clients in February, according to the firm’s latest trading activity index.

The server producer counts Nvidia (NVDA) and Advanced Micro Devices among its customers. Its stock had risen at a breakneck pace even before last year’s bull market. The shares jumped roughly 87% in 2022, while other tech names and the broader market got pummeled as the Federal Reserve raised interest rates aggressively to bring down wayward inflation.

Supermicro’s runaway gains are indicative of the burgeoning demand for high-quality infrastructure to support AI chips, after the creation of OpenAI’s ChatGPT in November 2022 kickstarted a race among tech behemoths to develop generative AI platforms and tools.

Nvidia has been the biggest beneficiary of the AI boom. The chipmaker, which produces processors that power AI systems, reported last month that its full-year profits grew more than 580% from the prior year.

“Everyone’s looking for something that looks and smells and tastes like Nvidia. … [Supermicro] is exactly that,” said Victoria Bills, chief investment strategist at Banrion Capital Management.

Supermicro has a market cap of roughly $63 billion, up from $5 billion just a year ago. The stock is set to join the benchmark S&P 500 index at its next quarterly rebalance.

Wall Street thinks it has more room to run. Bank of America analysts initiated coverage on Supermicro last month with a “buy” rating and price objective of $1,040, which the stock has already surpassed, closing at $1,124.70 a share on Wednesday. Wells Fargo and Goldman Sachs analysts also recently initiated coverage.

“The company’s willingness to experiment with different combination of components, its close proximity to leading semiconductor companies in San Jose and the fact that a majority of its manufacturing is in the United States is a competitive advantage,” wrote BofA analysts in a February 15 report.

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