(Bloomberg) — Super Micro Computer Inc. shares jumped in premarket trading on Friday, suggesting that the maker of servers that has become one of the hottest names in the AI space, would add another superlative to its record-breaking year by posting its strongest ever week.
Most Read from Bloomberg
Shares rose 5.6% before the bell. The stock has already risen about 36% this week, as of its latest close, its biggest one-week percentage gain on record. Should the stock end Friday’s session in the green, that would represent its 10th straight positive session, its longest winning streak in almost a decade.
The weekly jump is merely the latest example of how investors have gravitated toward Super Micro. The stock has risen in 18 of the past 20 sessions, through Thursday’s close, and is up more than 250% this year. That follows a gain of 246% over 2023.
The company has become a darling for investors wanting exposure to artificial intelligence given robust demand for its servers, the infrastructure for the chips that in turn run artificial-intelligence applications. Bank of America, which started coverage on the stock with a buy rating and Street-high price target earlier this week, expects the market for AI servers to grow at an average compound annual growth rate of 50% over the next three years, and it expects Super Micro will be a primary winner of that growth
The company has been demonstrating robust demand. A central catalyst for the stock’s recent strength came last month, when its preliminary quarterly results far exceeded expectations. It subsequently raised its revenue forecast.
Wall Street has taken notice. The analyst consensus for Super Micro’s net 2025 earnings has risen by 52% over the past month, while the view for revenue is up by a similar degree, according to data compiled by Bloomberg.
The company’s multiple has risen along with the stock advance, and the rally has brought Super Micro’s relative strength index to 97, well above the level of 70 that signals to some technical analysts that a stock is overbought.
Given that, some have cautioned about the scale of the move. Wells Fargo Securities on Friday started coverage on the stock with an equal-weight rating, saying shares are “already discounting solid upside.”
However, analyst Aaron Rakers added, the company’s “AI-fueled fundamental momentum, underpinned by engineering-first differentiation, has been nothing less than remarkable and should support some sustainable valuation re-rate.”
Currently, 11 analysts recommend buying the stock, while Wells Fargo is the third to have a hold rating. Just one, Susquehanna, has a sell rating. The average analyst price target is just over $700; given the stock last closed above $1,000, this represents downside of about 30%.
Still, growth expectations are so robust that Super Micro doesn’t trade with the kind of nosebleed valuation that mark other investor favorites. Shares trade at 39 times estimated earnings, compared with more than 90 for Arm Holdings, the chip designer that recently gave a bullish sales forecast that it attributed in part to AI spending. Nvidia Corp, perhaps the most prominent beneficiary of AI interest, has a multiple of about 34.
The rally has resulted in a market valuation of more than $56 billion for Super Micro, making it larger than long-time semiconductor mainstays like Microchip Technology Inc.
The stock is the best performer among components of the S&P Midcap 400 Index by a dramatic margin. In second place, after Super Micro’s 250%-plus surge, is Coherent Corp, up less than 40%.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Signup bonus from
