Super Micro Computer(NASDAQ: SMCI), more commonly known as Supermicro, lost more than two-thirds of its market value over the past 12 months. The server company's booming artificial intelligence (AI) business once made it a red-hot growth stock, but the bulls retreated as it struggled with accounting issues, a delayed 10-K filing, delisting threats, and regulatory subpoenas.
Yet Supermicro dodged a delisting by turning in its long-overdue 10-K filing in February 2025. Its revenue surged 110% in fiscal 2024 (which ended last June), and the company expects 74%-101% growth in fiscal 2025 as the AI boom continues. From fiscal 2024 to fiscal 2027, analysts expect its revenue to grow at a compound annual growth rate (CAGR) of 37% as its earnings per share (EPS) rises at a CAGR of 22%. Those are high growth rates for a stock that trades at just 9x next year's earnings.
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Assuming Supermicro matches analyst estimates and trades at a more generous 20x forward earnings by the beginning of fiscal 2027, which starts in July 2027, its stock price could soar more than 130% to $73.10. That would boost its market cap from $19 billion to $44 billion over the next two years.
However, that's a best-case scenario. It assumes the company weathers the unpredictable tariffs and trade wars, keeps pace with its bigger competitors like Hewlett Packard Enterprise and Dell in the booming AI server market, and avoids any more accounting and regulatory challenges.
Missing any of those goals could throttle the company's growth and drive it toward a worst-case scenario, instead. If Supermicro only grows its EPS at a CAGR of 5% from fiscal 2024 to fiscal 2027, and its stock trades at just 10x forward earnings by the beginning of the final year, its stock price could only rise 16% to $36.55 over the next two years and boost its market cap to $22 billion.
Instead of wondering if Supermicro will be worth $22 billion or $44 billion in two years, investors should check out a less valuable tech company that faces fewer headwinds but might be more valuable by 2027: Reddit(NYSE: RDDT).
Why Reddit might be more valuable than Supermicro in two years
Reddit, which blends together social networking, news aggregation, and discussion forums across its platform, went public a year ago. Its stock price has surged from its initial public offering (IPO) price of $34 to $96, which gives it a current market cap of $17 billion.
From 2021 to 2024, Reddit's number of year-end daily active unique users surged from 53.9 million to 101.7 million. Its revenue increased at a CAGR of 42%, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turned positive in 2024.
Reddit's rapid growth has been driven by discussions about political events, news stories, and pop culture topics like TV shows, movies, and video games. An increasing number of visitors also use it as a search engine to find human-driven discussions about myriad topics.
Those discussions fed more first-party into the targeted ads that generate most of the company's revenue. Reddit also struck partnerships with Alphabet's Google and OpenAI's ChatGPT to drive more users to its platform.
From 2024 to 2027, analysts expect Reddit's revenue and adjusted EBITDA to grow at a CAGR of 31% and 59%, respectively. They also expect it to turn profitable on a generally accepted accounting principles (GAAP) basis in 2025 -- and more than triple its annual GAAP EPS by 2027. It might seem a bit pricey at 89x this year's GAAP EPS, but the stock still looks reasonably valued at 27 times this year's adjusted EBITDA.
Reddit isn't completely immune to tariffs and other macro headwinds since an economic downturn could still drive its advertisers to rein in their spending. However, it could experience a milder impact because it doesn't export or import any physical products. And unlike Supermicro, it hasn't grappled with any major accounting or regulatory issues since its public debut.
If Reddit matches analyst expectations and still trades at 27 times its forward adjusted EBITDA by the beginning of 2027, its enterprise value could more than double to $32.4 billion over the next two years. Its market cap should also remain similar.
Is Reddit the better buy right now?
Therefore, Reddit might still be worth less than Supermicro in 2027 if the latter successfully weathers the incoming tariff and trade-war headwinds. However, Reddit might become the more valuable company if Supermicro fumbles and loses its luster. It's impossible to tell which will happen -- but Reddit might be the better growth play that faces a lot less near-term drama.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
