Super Micro Computer stock declined sharply after it cut Q3 sales and earnings guidance.
The company is still growing and profitable, making it well-positioned to capitalize on a significant long-term market opportunity.
Expect shares to remain volatile with more time needed for a sustained rebound.
This company was once a high-flying hero of the early artificial intelligence (AI) boom, but shares of Super Micro Computer(NASDAQ: SMCI) have become the antagonist in investor portfolios. The latest setback came as the tech giant slashed guidance ahead of final fiscal third-quarter results (for the period ended March 31, 2025). The stock is now down approximately 63% over the past year amid a major reset of expectations.
Nevertheless, it may not be the end of the line for this industry leader. Super Micro Computer continues to generate profitable growth, which keeps the potential open for shares to rebound.
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Let's discuss whether Super Micro Computer stock is a buy right now.
A whirlwind rise and fall
Few companies have experienced the roller-coaster trajectory that Super Micro Computer has in recent years. From just a little-known U.S.-based manufacturer of enterprise data servers, the company has gained prominence by capitalizing on demand for high-performance computers that are now critical components of AI infrastructure.
These specialized rack-scale systems integrate power, storage, cooling, and software components to support graphics processing unit (GPU)-based AI chips from Nvidia. Indeed, sales have more than quadrupled since 2020, reaching $21 billion in the last 12 months. Even with the recent stock price plunge, shares of Super Micro Computer have still returned more than 1,400% over the past five years.
That being said, this meteoric rise has been overshadowed by several controversies. In 2024, Super Micro Computer faced an accounting investigation by the U.S. Department of Justice (DOJ), prompting concerns that the stock could be delisted.
While an independent special committee has since cleared the company of misconduct allegations, and an audited 2024 annual report has resolved some of those serious uncertainties, it's clear that more time will be necessary to rebuild investor confidence.
Image source: Getty Images.
Mixed trends in 2025
Super Micro Computer recently provided investors with a business update, announcing preliminary third-quarter financial results. Unfortunately, the projections are well below expectations. The company cut its targeted revenue to a range of $4.5 billion to $4.6 billion, down from the prior $5 billion to $6 billion estimate. Similarly, Super Micro now sees the third-quarter adjusted earnings per share (EPS) between $0.29 and $0.31, compared to the $0.46 to $0.62 forecast previously.
Comments by management noted "delayed customer platform decisions," but reaffirmed the traction, particularly in its new generation of products. An investor conference call scheduled for May 6 should provide further details.
While the headline numbers don't inspire much confidence, there's a case to be made that the big picture for Super Micro Computer is positive. If the Q3 estimates are confirmed, at the midpoint, they still represent a solid 18% year-over-year increase in sales. EPS has been volatile as the company invests to expand production capacity, but reflects sharply higher operating income compared to levels two years ago.
Super Micro Computer is no longer a hyper-growth stock, but it still stands to capitalize on a long-term opportunity to expand. Analysts at Goldman Sachs forecast that global power demand from data centers will increase by as much as 165% by the end of the decade, compared to 2023, as AI workloads surge.
That's great news for Super Micro Computer, which benefits from its technical leadership in direct-liquid cooling (DLC) for server power management systems, a technology that delivers significant efficiency benefits and cost savings for energy-intensive data centers. Super Micro expects more than 30% of new developments worldwide to adopt liquid-cooled infrastructure this year.
By this measure, the allure of Super Micro Computer as an investment today is its specialization in these high-performance systems, with room to consolidate market share gains over competitors like Dell Technologies and International Business Machines.
Still a comeback story
The rest of 2025 will be pivotal for Super Micro Computer to demonstrate that its Q3 weakness is temporary and that it can move past the corporate challenges that defined 2024. I expect the stock to remain volatile.
Still, Super Micro has enough strong points in its outlook for shareholders to stick with the stock. For long-term investors confident in an eventual turnaround, this deep sell-off in the stock could be a good spot to start building a small position in a diversified portfolio.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, International Business Machines, and Nvidia. The Motley Fool has a disclosure policy.
