Why Artificial Intellingence (AI) Stock Super Micro Computer Popped This Week

Super Micro Computer (NASDAQ: SMCI) stock has gotten crushed over the last six months. Shares of the provider of server, storage, and coolant systems for the massive data center buildout have been cut in half during that time.

But the stock is still up by over 60% year to date from high demand as large technology companies work to quickly expand artificial intelligence (AI) computing capacity. This week, shares began to recover from the recent slump and were higher by about 13% as of Thursday afternoon, according to data provided by S&P Global Market Intelligence.

AI business is booming

After surging earlier in 2024, Supermicro shares began to sink after a report from short-seller Hindenburg Research claimed it found "glaring accounting red flags, evidence of undisclosed related party transactions, sanctions and export control failures, and customer issues." Hindenburg noted it had a short position in the stock. Shares plummeted further after Supermicro announced it was delaying the 10-K annual report filing for its fiscal 2024 year ended June 30.

But since then, CEO Charles Liang said in a letter to customers that the company doesn't anticipate any material changes to the previously released financial reports, and that the business remains on track. He assured customers that engineering, production, and sales of its large-scale AI solutions have not been affected.

In a follow-up to that this week, along with the company introducing a new liquid cooling product, it revealed that it was currently shipping Nvidia's GPUs (graphics processing units) at a rate of over 100,000 per quarter.

With Nvidia Blackwell chips reportedly expected to cost at least $30,000, that translates into billions in quarterly sales for Supermicro. That could mean Supermicro's revenue growth continues to outperform expectations in coming quarters. It's why investors jumped back into the stock this week, too.

But investors will also want to monitor profit margins. Gross profit margin of 11.2% dropped from 17% year over year in the fiscal Q4 period ended June 30. If that decline continues, this week's stock spike might not last.

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Howard Smith has positions in Nvidia and Super Micro Computer. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.