Super Micro Computer: SMCI is already up 300% this year, will lead the S&P 500 upon inclusion
- Super Micro Computer stock gains once again on Wednesday.
- SMCI is scheduled to enter the S&P 500 on March 18.
- SMCI stock has risen more than 1,000% in the last year.
- Argus gives SMCI a $1,350, Street-leading price target.
Super Micro Computer (SMCI) appears unstoppable as the calendar rolls into early March. Despite having possibly the dumbest name in all of tech, Super Micro Computer is already up more than 300% so far in 2024 as Wall Street drowns the San Jose-based company in praise.
The primary reason that investors have glommed onto SMCI stock recently is that the company is now slated to join the S&P 500, which forces the world’s largest index funds to hold shares in Super Micro Computer. The company will replace Whirlpool (WHR) in the index.
Shares of SMCI have risen more than 4% on Wednesday, traipsing through the $1,140s, while the S&P 500 gains 0.9% in a bullish session.
Super Micro Computer Stock News
As a maker of servers specialized for artificial intelligence (AI) use cases, Super Micro Computer has a market cap of $60 billion, about four times the valuation necessary to be included in the S&P 500. The company had not been added before, because it has only recently achieved such a valuation.
SMCI stock has risen more than 1,000% over the past year as its profits continued to climb. The company grew adjusted EPS more than 500% over the past two years. That is even better than Nvidia (NVDA), the premier AI stock, which has gained 265% in that time. Like Nvidia, Super Micro Computer is a pick-and-shovel play.
Companies intent on developing new applications in the AI realm require GPUs from Nvidia to get the job done. Super Micro Computer then creates servers and storage products that are purpose-built for GPU-focused architectures, as well as software to manage them. Interestingly, both companies were founded in California in the same year – 1993.
As the AI sector sees massive growth over the next few years, Wall Street expects Super Micro Computer to benefit greatly.
“SMCI is very well positioned to serve demand from AI over the next few years,” wrote analysts from Goldman Sachs in a research note this week. However, the team said Cisco (CSCO) and Dell (DELL) are expected to become more competitive after several years, which should slow down Super Micro Computer’s blistering growth.
Goldman Sachs gives SMCI stock a neutral rating since it has already garnered a heady forward-looking valuation. Argus, on the other hand, posted the Street high price target for SMCI this week at $1,350.
“In our view, Super Micro is a leading computer and server provider for the age of generative AI,” wrote Argus lead analyst Jim Kelleher. “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”.
Semiconductor stocks FAQs
A semiconductor is a term for various types of computer chips. Officially called semiconductor devices, these computer chips rely on semiconductor materials like silicon and gallium arsenide to process the electrical current that produces the modern world of computing. They come in many shapes, sizes, enhancements and configurations such as diodes, transistors and integrated circuits to more complicated applications like DRAM memory, simple processors and even GPUs.
First, there are the pure chip designers, such as Nvidia, AMD, Broadcom and Qualcomm. These companies use sophisticated software to design and test chips. Second, there are the equipment manufacturers that provide the machines necessary to build computer chips. These include ASML and Lam Research. Then, there are foundries that manufacture the chips. These include Taiwan Semiconductor and GlobalFoundries. Last of all are the integrated device manufacturers who design their own chips and additionally manufacture themselves. These include Samsung and Intel.
It is the observation that the number of transistors in an integrated circuit doubles every two years. The “law” is named after Gordon Moore, who founded Fairchild Semiconductor and later Intel. The doubling is possible due to the shrinking size of process nodes or parts in the computer chip. In 1971 the advanced commercial manufacturing had reached 10 microns in width. In 1987 semiconductor technology had advanced to 800 nanometers in width. By 1999, this process had moved to 180 nanometers. By 2007, the size had dropped to 32 nanometers, and this fell all the way to 3 nanometers in 2022, which is close to the size of human DNA.
In 2022, the global semiconductor industry had revenues just under $600 billion. In total, the industry shipped 1.15 trillion semiconductor units in 2021. The leading nations involved in the semiconductor supply chain are Taiwan, the United States, China, the Netherlands, South Korea, Japan and Israel.
Super Micro Computer stock forecast
SMCI stock ricocheted off the 61.8% Fibonacci Extension on the daily chart. This Fibo level comes in just below $1,170. A break above that level will allow bulls to make a lunge toward the 78.6% Fibo, which is placed just under $1,300.
SMCI stock is already overbought on the Relative Strength Index (RSI) but not worryingly so. The RSI clocks in at 72 on Wednesday.
Bulls should only get worried if the SMCI price action moves below the prior range high from February 16 near $1,078. The 20-day Simple Moving Average (SMA) should hold up if SMCI experiences a pullback. The 20-day SMA is nearby the 23.6% Fibo at $875, which offers it a fuller portion of respect from the trading community.
SMCI daily stock chart