Super Micro Computer’s Recent Pullback Demonstrates Normalizing AI Sentiments

  • We have watched as SMCI charted an impressive rally by +47.8% and crashed by -37.8% within two months, with the wider market similarly entering correction zones.
  • With the elevated interest rates likely to remain higher for longer and the normalization in macroeconomic outlook prolonged, we can understand why the market has over-reacted thus far.
  • Despite so, the long-term prospects for generative AI remain robust as similarly observed in SMCI’s raised FQ4’24 guidance, NVDA’s promising forward guidance, and TSM’s positive commentary.
  • Thanks to the recent pullback, the stock finally trades near our fair value estimates while offering an improved upside potential.
  • With SMCI still investing in profitable growth without overly relying on debt and share dilution, it remains a Buy at every dips.

We previously covered Super Micro Computer, Inc. (NASDAQ:NASDAQ:SMCI) in February 2024, discussing how the market had entered a new state of AI frenzy, with the stock valuations and prices reaching new all-time heights, offering interested investors with a minimal margin