of S&P500 (SNPINDEX: ^GSPC) It is the most popular benchmark in the US stock market. The index currently includes 500 large-cap companies, defined as companies with a value of $18 billion or more, covering approximately 80% of domestic stocks by market capitalization. To be considered for recruitment, a company must be profitable and its stock must be sufficiently liquid.
super microcomputer (NASDAQ:SMCI) The company became the newest artificial intelligence (AI) company to join the S&P 500 index in March 2024, just over a year after joining the index. S&P Midcap 400 Meanwhile, the stock price has soared more than 1,700% over the past two years as strong demand for AI computing products fueled rapid sales growth.
The stock still maintains a consensus rating of Buy among Wall Street analysts, and the median price target of $965 per share represents a 26% increase from the current price of $762 per share. It means the amount of increase. Here's what investors need to know about Supermicro.
Super microcomputers expand their share in the AI server market
Super Micro Computer develops high-speed computing platforms, including storage and servers for enterprise and cloud data centers, purpose-built for use cases such as 5G and artificial intelligence (AI) applications. Its platform integrates the latest chip, memory and storage solutions from suppliers such as: Advanced Micro Devices, inteland NvidiaAs such, Supermicro offers customers a high degree of flexibility in customizing their computing products.
Additionally, the company takes a unique building block approach to product development. They are typically able to integrate the latest technology into their servers and bring them to market before other manufacturers. On a recent earnings call, CEO Charles Liang told analysts, “We deliver optimized AI solutions at scale and have faster time-to-market than our competitors.” “We have achieved this advantage and shortened lead time.”
analyst of american bank The company believes its competitive advantage will increase market share for artificial intelligence servers, and Supermicro's sales will account for 17% in 2026, up from 10% in 2023.
Argus' Jim Kelleher is also bullish. “We believe Supermicro has a head start over traditional server vendors and is the perfect partner for Nvidia and other industry leaders' AI implementations,” he said in a note to customers. is written in. “Supermicro is the go-to for implementing GPU computing infrastructure in your data center for training large-scale language models (LLMs), inference, deep learning, and other elements that enable generative AI applications. emerging as a provider.”
Super microcomputers suffered a slight decline in the third quarter.
Supermicro shares plummeted 15% when the company reported lower-than-expected third-quarter results, but investors may have overreacted. Revenue for the quarter rose 200% to $3.8 billion, just short of the 209% growth that Wall Street was expecting. However, non-GAAP net income still rose 308% to $6.65 per diluted share, easily beating analysts' expectations for 255% growth.
In terms of optical revenue, Supermicro could have offered more products if there were no supply constraints, CEO Charles Liang said. In fact, executives are reporting record demand for water-cooled full-rack AI systems, and the company is offering products powered by Nvidia's new Grace Blackwell GB200 processor, which combines one Grace CPU with two Blackwell GPUs. It was introduced to the market for the first time.
Additionally, Supermicro actually raised its full-year revenue outlook. Guidance, currently at the midpoint, suggests sales will increase 110% for the 2024 fiscal year, which ends June 30. The company had previously projected sales growth of 104%, and Wall Street had expected sales growth of 106%. In other words, Supermicro believes the company is on a higher growth trajectory than before Q3, so the recent drawdown looks like a buying opportunity.
Supermicrocomputer stocks trade at surprisingly reasonable valuations
The AI server market is projected to grow at 47% annually from 2023 to 2028. JP Morgan Chase. Supermicro is well positioned to benefit from that tailwind. In fact, Wall Street expects the company to increase its earnings per share by 49% annually over the next three to five years.
Based on this consensus estimate, the current valuation of 42.7x P/E looks very reasonable. I say that because the price-to-earnings ratio (PEG), which compares the price-to-earnings ratio to expected earnings growth, is currently below 1. For context, NVIDIA's current PEG ratio is 2.and Amazon and microsoft They have a PEG ratio of 2.2 and 2.5, respectively.
Of course, if the company's earnings grow slower than Wall Street expects, the stock could fall. But patient investors who can stomach that risk should consider buying a small position in Supermicro, the S&P 500's newest AI stock.
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Bank of America is an advertising partner of The Motley Fool's Ascent. JPMorgan Chase is an advertising partner of The Motley Fool's Ascent. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Trevor Jennewine has positions at Amazon and his Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Bank of America, JPMorgan Chase, Microsoft, and he has positions in Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2025 $45 Calls on Intel, Long January 2026 $395 Calls on Microsoft, Short January 2026 $405 Calls on Microsoft, and $47 May 2024 Calls on Intel. It's a short call. The Motley Fool has a disclosure policy.
Introducing the latest artificial intelligence (AI) stocks in the S&P 500. In two years, he has soared 1,700%, and Wall Street says the stock is still a buy.
