On Friday Super Micro Computer Inc. stock surged during premarket trading, indicating that the server maker, which has garnered significant attention in the AI sector, could potentially achieve another remarkable milestone in what has already been a phenomenal year, possibly marking its most robust week to date.
Super Micro shares jump 5.6%
Shares experienced a 5.6% increase prior to the market opening. This week alone, the stock has surged approximately 36%, marking its most significant one-week percentage gain in recorded history up to its latest closure. If the stock maintains its upward trajectory by concluding Friday’s session positively, it would signify its tenth consecutive session of gains, marking its lengthiest winning streak in nearly ten years.
The recent surge in weekly performance is just the latest demonstration of investors’ strong interest in Super Micro. Over the past 20 trading sessions, the stock has shown gains in 18 instances, up until the recent close on Thursday. Remarkably, its value has soared by more than 250% since the beginning of the year, building on a substantial increase of 246% witnessed throughout the course of 2023.
Super Micro has emerged as a favored choice for investors seeking exposure to the flourishing realm of artificial intelligence. This surge in interest is primarily fueled by the substantial demand for its server infrastructure, which serves as the backbone for the chips powering various AI applications.
Recently Bank of America initiated coverage on the stock with a bullish buy rating and set a Street-high price target. The bank anticipates that the market for AI servers will experience a robust average CAGR f 50% in the next three years.
The corporation has shown strong demand, with a significant surge in its stock’s performance recently attributed to surpassing preliminary quarterly results. This led to an upward revision of its revenue forecast.
Analysts optimistic about Super Micro’s prospects
Investors and analysts on Wall Street have been paying close attention. According to data gathered by Bloomberg, there has been a notable increase in the consensus among analysts regarding Super Micro’s projected net earnings for 2025, rising by 52% in the last month. Similarly, forecasts for revenue have also experienced a considerable uptick.
Super Micro’s stock has surged, leading to a rise in its multiple and pushing its relative strength index to 97, well above the overbought threshold of 70. Some analysts, like Wells Fargo Securities, caution that the stock may have already priced in significant gains.
Despite this, analyst Aaron Rakers highlights the company’s strong fundamentals driven by AI and engineering, suggesting a sustainable valuation increase. Currently, most analysts recommend buying the stock, with only a few holding or selling. The average price target is around $700, implying a potential downside of approximately 30% from its recent close above $1,000.
Super Micro’s growth expectations remain strong, reflected in its relatively moderate valuation compared to other investor favorites. While Super Micro trades at 39 times estimated earnings, Arm Holdings and Nvidia Corp, major players in the chip and AI sectors, command significantly higher multiples, with Arm Holdings at over 90 and Nvidia at around 34.