10 Worst Booming Stocks to Buy According to Short Sellers

2. Super Micro Computer, Inc. (NASDAQ:SMCI)

Year-to-Date Performance as of September 14: 60.2%

Short % of Shares Outstanding as of September 14: 14.9%

Number of Hedge Fund Holders: 47

Super Micro Computer, Inc. (NASDAQ:SMCI) is a technology hardware, storage, and peripherals company based in San Jose, California. It offers high-performance server and storage solutions based on modular and open architecture.

Super Micro Computer, Inc. (NASDAQ:SMCI) has also been hit by the rising negative opinion surrounding AI stocks this September, and this has only been exacerbated by a short-seller report from Hindenburg Research, which resulted in the stock falling even further than before.

The biggest red flag for investors following Super Micro Computer, Inc. (NASDAQ:SMCI) right now is that its revenue seems too dependent on AI. In the fiscal year that ended in June, the company brought in revenue of $15 billion, which is over double the amount it brought in a year ago. This may be a cause to celebrate for some, but a closer look at the company’s historical performance shows that before the AI boom, Super Micro Computer, Inc. (NASDAQ:SMCI) was seeing no revenue growth.

Considering this, investors are concerned that if we are in an AI hype cycle, stocks like Super Micro Computer, Inc. (NASDAQ:SMCI), which are heavily dependent on AI spending for their revenues, may be the first to fall if the AI hype goes down. This might also explain short sellers’ approach to this stock at present, in addition to the accounting discrepancies that are making headlines.

In total, 47 hedge funds were long Super Micro Computer, Inc. (NASDAQ:SMCI) in the second quarter, with a total stake value of $1.5 billion.

Scout Investments, Inc mentioned Super Micro Computer, Inc. (NASDAQ:SMCI) in its second-quarter 2024 investor letter:

“Super Micro Computer, Inc. (NASDAQ:SMCI) was the top detractor to returns in the second quarter. Super Micro designs and manufacturers server solutions based on modular and open-standard architecture. This modular approach combined with a strong engineering culture helps the company to supply the market with advanced servers and rack-scale compute solutions quickly. After an impressive return in the first quarter, the company offered disappointing near-term earnings guidance, though we do not believe its long-term opportunity has diminished. We expect continued strong growth for several years, although the range of outcomes is quite wide; it is difficult to forecast AI server market growth with precision.”