Super Micro Stock's Newest Bull Says It's 'The Coolest Kid in AI Town'

Key Takeaways

• Analysts at Needham started coverage of Super Micro Computer with a "buy" rating and a bullish price target.

• The server maker has the potential to double its manufacturing capacity of liquid cooling rack systems in the long term, Needham analysts said.

• Super Micro's stock has drawn skepticism in recent weeks from other analysts, including those at JP Morgan, though the share remains up substantially year-to-date.

Super Micro Computer (SMCI) shares are trading for less than half of their 2024 high. The server maker has a new bull that sees a recovery ahead.

Analysts at Needham initiated coverage of Super Micro with a "buy" rating and price target of $600, a premium of more than 36% to Tuesday’s close. The company, which Needham called “the coolest kid in AI town," is involved in the deployment of some of the world’s largest AI clusters and entered fiscal 2025 with record order backlog.

Needham cited Super Micro’s position as a first mover in rack-level liquid cooling systems, an important technological component of reducing the electricity cost of data centers. The company has expanded its liquid cooling rack manufacturing capacity in Silicon Valley and Taiwan, and will launch production in Malaysia in November.

The stock edged lower today, finishing near $437.

JP Morgan Cools Its Jets

Earlier this month, JP Morgan analysts downgraded Super Micro to "neutral" from "overweight" and cut their price target to $500 per share from $950.

Super Micro delayed the release of its annual report last month, which JP Morgan said could also cause an "overhang," recommending that new investors "remain on the sidelines" until the uncertainty is resolved.

Shares of Super Micro are up more than 50% this year but have lost about half of their value over the past three months in part due to disappointing fiscal fourth-quarter earnings.

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