Is Super Micro Computer Stock a Buy Right Now?

Super Micro Computer (NASDAQ: SMCI) was once an untouchable stock. Last year, the price rose too far, too fast, then proceeded to sell off throughout the year. However, that sell-off was intensified after a now-defunct short-selling firm accused Supermicro (as it's often called) of accounting malpractice. Then, the company's auditor resigned, which may have made the company look guilty.

But it wasn't. An independent auditing committee cleared Supermicro of any wrongdoing, and a globally recognized accounting firm signed on as the new auditor.

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Despite these positive developments, the stock is still around the same price point when investors were convinced that these allegations were true. Now that they are disproven but the stock hasn't seen the benefit, is it time to load up on Supermicro shares?

Supermicro's partnership with Nvidia should bolster sales

The stock bottomed out in November 2024 at around $18 directly after its auditor resigned. It hovers around $33 now, but that's a far cry from the $60 it traded at after it was cleared of any wrongdoing. Furthermore, it's way off its all-time high of around $120 it set about this time last year.

As for its business, it's booming. Supermicro is a key part of the data center infrastructure buildout that's being pushed by the artificial intelligence (AI) race. While companies like Nvidia (NASDAQ: NVDA) and AMD (NASDAQ: AMD) make the computing hardware for these data centers, Supermicro handles the racks that these machines are placed in.

This may sound like a pretty straightforward product, but the company's technology bucks that notion. Unlike some of its competitors that use air to cool these computing devices, it has the option to use liquid cooling.

Water can absorb much more heat than air can as it flows over these machines through tubes. Supermicro also has racks designed for air cooling, but its liquid-cooled options are the ones it touts most.

There are significant benefits to this approach, namely energy and space savings. Air-conditioning units to cool server rooms are expensive and power-hungry. But liquid-cooled systems aren't as pricey and can save energy costs over the long term.

And because Supermicro's direct liquid cooled (DLC) servers don't have to account for airflow, they can be placed closer together, saving on space. The company estimates that DLC servers can offer 40% energy savings and 80% space savings, which can be a prime reason to select it to build server rack infrastructure.

That's exactly what Nvidia did, and Supermicro is the preferred partner for housing its Blackwell GPUs. This is a huge business boost because Blackwell GPUs are likely to become the most popular ones on that market as their production ramps up.

This is all great news for Supermicro, so why isn't the stock price moving up?

The stock is dirt cheap for its projected growth

Supermicro sources many of its components outside of U.S. borders, which is an issue based on President Donald Trump's tariff plans. In its 2024 annual report, the company specifically lists changes in U.S. foreign policy as a risk since its supply chain relies heavily on sources outside the U.S. This is part of the reason the stock got slammed as tariff announcements rolled out.

Another reason Supermicro hasn't caught on with investors is that it left them with a bad taste in their mouths. Even though it was cleared of wrongdoing, it's going to take a while for its reputation to recover. Until it does, a discount will be applied to the stock.

However, these two weaknesses may encourage investors to buy the stock, as it's dirt cheap.

SMCI PE Ratio (Forward) data by YCharts; PE = price to earnings.

At less than 13 times forward earnings, it's far cheaper than the S&P 500 (SNPINDEX: ^GSPC), which trades for 20.2 times forward earnings. Wall Street analysts also expect it to post strong earnings over the next few years, with 60% revenue growth coming in fiscal 2025 and 40% in fiscal 2026.

You would be hard-pressed to find a company of Supermicro's size that's expected to grow at those rates while being priced at less than the broader market. With Wall Street almost entirely bearish on Supermicro's stock, it may be time to pick up some shares, as plenty of pessimism is already priced in.

Should you invest $1,000 in Super Micro Computer right now?

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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.