Super Micro Computer, Inc. (NASDAQ: SMCI), commonly known as Supermicro, has been making waves in the tech world. The company recently announced a 10-for-1 stock split set to take effect on October 1, 2024, which will lower its share price from around $630 to approximately $63 per share. While this move is expected to attract a broader base of investors, there’s an even stronger case to consider buying Supermicro stock right now.
AI Infrastructure Demand Driving Massive Growth
Supermicro has established itself as a key player in the AI revolution, with its data center products in high demand. Unlike Nvidia, which often dominates AI headlines, Supermicro is benefiting from similar tailwinds as the demand for AI infrastructure skyrockets. The company’s offerings range from servers to complete racks and data center solutions, making it an essential cog in the AI machine. Its products stand out for two reasons: they are highly configurable to suit workloads of any size, and they are more energy-efficient compared to the competition, which helps reduce long-term operational costs for businesses.
These advantages have resulted in exceptional revenue growth for Supermicro. The company anticipates generating between $6 billion and $7 billion in revenue for Q1 2025, representing a staggering 183% to 230% year-over-year increase. Looking ahead to fiscal 2025, Supermicro expects to bring in between $26 billion and $30 billion in revenue, translating to 74% to 101% growth over the prior year.
What’s even more compelling is the company’s long-term vision. At the end of fiscal 2023, Supermicro had set a goal of reaching $20 billion in annual revenue. But just two quarters later, that target had jumped to an astonishing $50 billion, reflecting the rapid expansion of the AI infrastructure market and Supermicro’s rising dominance within it.
Why the Recent Stock Dip Presents a Buying Opportunity
Despite its impressive growth trajectory, Supermicro’s stock dropped by 20% following its Q4 2024 earnings announcement. The dip was primarily driven by concerns over margins, which took a hit due to new product launches. However, this short-term drop in profitability is not expected to last beyond fiscal 2025, and analysts believe that Supermicro is well-positioned to recover its margins in the near future.
For investors, this dip presents an opportunity to buy the stock at a bargain. Supermicro is currently trading at 18.4 times forward earnings, a relatively low valuation for a company experiencing such rapid growth. Moreover, earnings are expected to grow by 72% over the next year, making the current price even more attractive.
If Supermicro’s margins recover as anticipated, the stock could see significant upside, offering patient investors a chance to capitalize on both revenue growth and earnings expansion.
The Broader AI Market: A Rising Tide for Supermicro
Supermicro’s strategic positioning within the AI infrastructure market is another major reason to invest. AI and data centers are at the forefront of technological innovation, and Supermicro’s products play a crucial role in powering the largest AI clusters globally. As companies across industries increasingly adopt AI technologies, the demand for efficient, scalable, and customizable servers and infrastructure will continue to grow, further boosting Supermicro’s prospects.
The company’s first-mover advantage in designing GPU-based compute systems and liquid-cooled rack solutions gives it a competitive edge, particularly as energy efficiency becomes a more pressing concern for data centers. Supermicro’s ability to address these needs positions it to capture a significant share of the AI infrastructure market in the coming years.
Conclusion: A Stock Poised for Long-Term Growth
While Supermicro’s stock split is set to make shares more accessible to a wider range of investors, the company’s long-term growth potential is the real reason to buy now. With AI infrastructure demand surging and Supermicro consistently exceeding its revenue targets, the company is well-positioned for continued success. The recent dip in stock price offers a rare opportunity to buy into a high-growth company at a relatively low valuation. For investors looking for exposure to the AI sector, Supermicro presents a compelling investment case.
