4. Super Micro Computer, Inc. (NASDAQ:SMCI)
Stock Price as of August 9: $508.76
Average Analyst Price Target Upside as of August 9: 36.21%
Super Micro Computer, Inc. (NASDAQ:SMCI) is a California-based tech company that focuses on the design, manufacture, and marketing of advanced server and storage systems that are essential for contemporary IT infrastructure. The company’s product range includes high-performance servers, modular blade servers, and specialized storage solutions, made for the needs of diverse markets such as data centers, cloud computing, AI, and edge computing. The company offers a variety of products, including complete server systems, server management software, networking equipment, and essential server components such as motherboards and power supplies.
Among its prominent products is the SuperServer series, which features models like the SuperServer 6029TP-HTR, built for demanding computational tasks. Super Micro (NASDAQ:SMCI) also offers Blade Servers with modular designs that optimize space usage in data centers. Additionally, the company’s Rack Solutions provides flexible configurations designed to meet the needs of enterprise environments.
As per the coverage of 19 analysts, Super Micro (NASDAQ:SMCI) has an average price target of $693.00, which represents an upside of 36.21% from the current levels, as of August 9. It takes the fourth spot on our list of the best computer hardware stocks to buy now.
Super Micro (NASDAQ:SMCI) has been experiencing remarkable growth, largely fueled by the rising need for AI servers. In its Q4 earnings report, which covers the period ending June 30, the company showcased an impressive 110% increase in revenue, reaching approximately $15 billion. This surge reflects the strong demand for its products, with adjusted earnings per share nearly doubling from $11.81 in fiscal 2023 to $22.09.
Despite facing some short-term challenges, particularly with lower-than-expected gross margins, Super Micro’s (NASDAQ:SMCI) long-term outlook remains positive. On August 7, an analyst from JPMorgan maintained an Overweight rating on the stock with a $950 price target. They acknowledged the initial concerns about margin softness but highlighted that these are temporary.
They anticipate that as the company overcomes current manufacturing inefficiencies and adjusts strategic pricing, margins will improve. This optimism is further supported by the firm’s projection of enhanced gross margins in the coming quarters, along with limited impact from delays in NVIDIA Corporation’s (NASDAQ:NVDA) Blackwell solutions.
The company is also well-positioned to benefit from emerging trends in data center technology. Super Micro (NASDAQ:SMCI) has made significant strides in the direct liquid cooling (DLC) market, which is gaining traction due to the increasing power demands of AI servers. The company introduced its new liquid-cooled solutions at Computex in early June, and since then, demand has exceeded expectations.
As per CEO Charles Liang, the company has already shipped around 1,000 liquid-cooled racks in just a couple of months, which represents more than 15% of new global data center deployments during that period. Moreover, the company forecasts that 25% to 30% of new data center setups will adopt DLC solutions within the next year.
The Brown Capital Management Small Company Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its first quarter 2024 investor letter:
“We are benchmark-agnostic, so we spend our time researching current or potential EGCs, not analyzing indexes. However, this quarter there was inescapable attention on one AI-related company, Super Micro Computer, Inc. (NASDAQ:SMCI), which makes servers that hold Nvidia’s (NVDA) graphics processing units. Pundits wondered if Super Micro was the next AI “meme stock” set to soar like Nvidia. Super Micro’s stock price was up 255% in the first quarter and indeed is up a jaw-dropping 848% in the last year. Importantly, Super Micro is in the Russell 2000® Growth index, and alone accounted for over a third, or 2.82%, of the index’s 7.58% total return this quarter. However, Super Micro is not a company we could have ever owned. The company generated more than $7 billion in revenue in its last fiscal year, far above our current maximum revenue threshold. In fact, when the company came public in March 2007, it was already too large for our portfolio. Now, the company is so large that it moved into the S&P 500 index at the end of the first quarter. Nevertheless, not owning Super Micro was the largest detractor to our performance versus the index this quarter, comprising more than one-third of our underperformance. This, to us, is a reminder why an index is not always an accurate gauge of our short-term performance.”
