‘It’s All About Trust,’ Says Top Investor About SMCI Stock

Super Micro Computer (NASDAQ:SMCI) stock is surging 18% in after-hours trading after the AI server maker delivered a quarterly report that shifted investor attention away from recent controversies and back toward demand. While the company’s revenue missed expectations, guidance came in far stronger than anticipated, suggesting hyperscaler and enterprise AI spending remains intact. Just as importantly, margins showed meaningful improvement, easing concerns that pricing pressure and execution problems were beginning to spiral.

Specifically, SMCI reported non-GAAP earnings per share of $0.84, beating consensus estimates by $0.22, while revenue surged 121.7% year over year to $10.2 billion, though that still fell short of expectations by roughly $2.25 billion. Gross margin came in at 9.9%, improving from 6.3% in the prior quarter and 9.6% in the year-ago period. Looking ahead, the company guided fiscal fourth-quarter revenue to a range of $11 billion to $12.5 billion, compared to Wall Street expectations of $11.31 billion, while forecasting non-GAAP earnings per share of $0.65 to $0.79 versus consensus estimates of $0.56. However, full-year fiscal 2026 revenue guidance of $38.9 billion to $40.4 billion came in below the Street’s $41.47 billion expectation.

That relief rally comes after what has been a spring to forget for SMCI. In late March, the company was rocked by allegations that individuals affiliated with the business – including a co-founder and board member – had circumvented U.S. export controls to illegally ship AI-related technology to China. The news reignited long-standing concerns surrounding governance and compliance at the company, which only last year was on the verge of being delisted from the Nasdaq exchange.

Although SMCI quickly distanced itself from the indicted individuals, investors feared the reputational damage could push customers toward rival suppliers. Those worries appeared to gain traction after reports surfaced suggesting Oracle had potentially canceled between $1.05 billion and $1.4 billion worth of orders.

One top investor who remains deeply skeptical is James Foord, who believes the recent developments may represent only the beginning of a much broader deterioration story.

“Markets can ignore governance concerns, but customers rarely do, especially in an industry as critical and supply-constrained as AI infrastructure,” explains the 5-star investor, who is among the top 3% of stock pros covered by TipRanks.

Foord points out that hyperscalers are allergic to potential disruptions with their suppliers, as their massive scale, exact timelines, and rigorous compliance regimes leave no room for uncertainty. This makes the recent developments at SMCI a matter of grave concern, especially since SMCI isn’t the only game in town.

The investor isn’t convinced that SMCI’s “competitive moat” is sufficiently deep to prevent rivals – he namechecks Dell Technologies, for instance – from swooping in. This could create a so-called “doom loop” for the company, whereby delays and cancellations lead to weaker demand and “little to no growth.”

“At this point, SMCI is no longer a stock we can value with traditional metrics,” he asserts. “This is not about valuation, growth rates, or even the AI narrative. It is about trust and whether that trust can be restored before it begins to materially impact the business.”

Foord is not willing to take that risk, rating SMCI a Strong Sell. (To watch Foord’s track record, click here)

Wall Street, meanwhile, remains on the sidelines. With 3 Buys, 8 Holds, and 2 Sells, SMCI carries a consensus Hold (i.e., Neutral) rating. Its 12-month average price target of $30.53 implies potential upside of about 10% from Tuesday’s closing price. (See SMCI stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.