‘Room for Disappointment,’ Says Investor About Super Micro Computer Stock

Investors in Super Micro Computer (NASDAQ:SMCI) have been on a topsy-turvy rollercoaster of a ride for well over a year. The company rocketed upwards during the first few months of 2024 as it rode the AI wave to great heights – only to find itself falling back down to earth as the seasons passed.

Arguably the biggest strike against the company was its accounting issues, which even placed its listing on the NASDAQ at risk. A successful 10-K filing has now quieted the bulk of these compliance fears, leaving investors to (mostly) focus on SMCI’s revenues and earnings.

On that note, they were in for a bit of a disappointment following its Fiscal Q3 2025 earnings report in early May, with revenues down 19% from the previous quarter. Earnings were also down, with non-GAAP EPS clocking in at $0.31 verses the $0.66 the company delivered last year.

However, more recently, things have been looking up. Just a few days ago, Super Micro Computer and the Saudi Arabian data center DataVolt announced a major, $20 billion dollar partnership. SMCI will be building GPU platforms and rack systems for DataVolt during the multiyear engagement.

All told, SMCI’s share price is has gained over 30% year-to-date.

Though dollar signs are flashing, investor Marc Gerstein cannot bring himself to jump on board.

“I see a lot of room for investor disappointment in the pace of the next upturn as investors learn how fierce competition now is,” explains Gerstein.

The investor readily acknowledges that there is a bull case to be made for SMCI, especially as hungry appetites for Nvidia’s Blackwell chips drive demand for Super Micro Computer’s AI servers.

However, Gerstein is fearful that the competition is becoming too intense, with domestic rivals, foreign firms, and “price-killing” Original Design Manufacturers (also known as ODMs) joining the mix.

“ODM products can and often are much cheaper than those sold by known brands like SMCI,” adds Gerstein.

The investor believes that Wall Street is not taking sufficient notice of the increasing competition, leading to heightened expectations that the company will struggle to meet.

“I see a lot of room for disappointments ahead… not in an absolute sense, but relative to what I believe the street expects,” concludes Gerstein, who rates SMCI a Sell. (To watch Marc Gerstein’s track record, click here)

Wall Street analysts, as noted, are a bit more upbeat than Gerstein. With 6 Buys, 5 Holds, and 1 Sell, SMCI enjoys a Moderate Buy consensus rating. Its 12-month average price target of $40.83 would see minimal movement in the year ahead. (See SMCI stock forecast)

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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.