Super Micro Computer (SMCI) may be one of the hottest names in AI hardware, with the stock up nearly 64% year-to-date, but not everyone is convinced the rally can last. BofA Securities analyst Ruplu Bhattacharya just resumed coverage of the stock with an Underperform (equivalent to Sell) rating and a $35 price target, implying more than 30% downside from current levels.
Don’t Miss TipRanks’ Half-Year Sale
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
BofA Warns of Profit Headwinds for Super Micro Stock
The analyst believes that Super Micro’s profit margins could come under pressure as competition in the AI server space intensifies. Big players like Dell (DELL) and HP Enterprise (HPE) have strong ties with enterprise customers and broader resources, which may push Super Micro to lower prices. That could hurt its margins and reduce profitability.
The analyst also warned that shortages of key parts, including GPUs and liquid cooling components, could restrict the company’s ability to meet growing demand. On top of that, he believes that Super Micro’s early lead in liquid cooling may not last, as the technology becomes more common.
Bhattacharya pointed to other concerns too, including ongoing legal issues and weak internal controls. He expects revenue to come in above market forecasts. But he remains cautious about profits and sees gross margins falling from 11.3% in FY25 to 9.4% by FY27.
Overall, with tougher competition, supply challenges, and growing risks, he sees more downside than upside from here.
Is SMCI Stock a Buy?
Super Micro Computer stock has a consensus Moderate Buy rating among 14 Wall Street analysts. That rating is based on six Buy, six Hold, and two Sell recommendations issued in the last three months. The average SMCI price target of $40.92 implies 18.19% downside from current levels.
