Super Micro Computer stock (NASDAQ:SMCI) has been a stock of interest lately, especially after a surge in its price triggered by an update on its AI data center capacity. The company revealed that it is ramping up production availability of its “end-to-end AI data center Building Block Solutions,” which includes the innovative NVIDIA Blackwell platform. However, after dealing with issues like delayed financial filings, a looming threat of delisting from Nasdaq, and a disappointing Q1 revenue update, is SMCI stock truly out of the woods? In this article, we’ll examine whether now is the time to buy, sell, or hold Super Micro Computer stock.
4 Reasons to Buy Super Micro Computer Stock
- Strong Market Growth in AI Servers
Super Micro is positioned to benefit from the explosive growth of AI and data center infrastructure. The global AI server market is expected to expand at a compound annual growth rate (CAGR) of 18%, reaching $177.4 billion by 2032. As the demand for large-scale AI models increases, the need for high-performance computing hardware—such as servers and storage solutions—grows as well. Super Micro’s advanced solutions are ideally suited to cater to this demand.
- Addressing Compliance Issues
Super Micro has faced regulatory hurdles in the past, but the company is making efforts to resolve these challenges. After the resignation of its previous auditor, EY, Super Micro appointed BDO and successfully submitted a compliance plan to Nasdaq, which was accepted. These steps toward improving governance and transparency signal the company’s commitment to cleaning up its act, potentially reducing investor concerns.
- Competitive Edge in AI and Data Center Tech
One of Super Micro’s key differentiators is its modular design approach, which allows for rapid customization of server configurations. This flexibility is essential in today’s fast-paced tech landscape, particularly with the rise of AI-driven applications. The company’s advancements in liquid cooling technology further set it apart, as energy-efficient cooling is becoming critical for AI-powered data centers. With the ability to ship 100,000 GPUs per quarter and 2,000 liquid-cooled racks, Super Micro continues to innovate.
- Attractive Valuation
Super Micro stock is currently trading at 11.34x forward earnings and 0.75x forward sales. These multiples suggest that the stock is undervalued compared to its potential, factoring in both risks and opportunities. While the company has experienced some setbacks, its long-term prospects in AI and data center infrastructure remain promising.
4 Reasons to Sell Super Micro Computer Stock
- Q1 Results Delay and Disappointing Guidance
Investors were already concerned when Super Micro delayed its Q1 results for fiscal 2025, but the preliminary results made matters worse. The company lowered its revenue guidance to between $5.9 billion and $6 billion, down from an earlier forecast of $6 billion to $7 billion. This negative revision, along with a reduction in earnings per share guidance, cast a shadow over the stock.
- Department of Justice Scrutiny
Super Micro is under investigation by the Department of Justice, which has added significant risk to the stock. The company has a history of regulatory challenges, having previously been delisted from Nasdaq in 2018 due to delayed filings. The uncertainty surrounding these legal and compliance issues may deter some investors from holding or buying the stock.
- Increased Competition in the AI Server Market
Super Micro faces growing competition in the AI server space, especially as larger players like NVIDIA (NASDAQ:NVDA) seek to diversify their supplier relationships. As these companies expand their market share, Super Micro may find it harder to maintain its competitive position, especially given the company’s recent troubles.
- Capital-Intensive AI Server Business
AI server production is a capital-intensive business, and Super Micro has been struggling to secure the necessary funds to ramp up production. Without adequate funding, the company could face challenges in meeting the surging demand for AI hardware. This lack of financial flexibility is a major concern for investors.
Analyst Consensus on Super Micro Computer Stock
Currently, Super Micro stock holds a “Hold” rating on Wall Street, with a mean target price of $49.56. This represents an upside potential of about 46.5% from current levels. However, out of 12 analysts covering the stock, only 2 rate it a “Strong Buy,” 1 gives it a “Moderate Buy,” and 8 maintain a “Hold” rating. Two analysts have given the stock a “Strong Sell” recommendation.
Conclusion: Should You Buy, Sell, or Hold SMCI Stock?
Super Micro Computer stock presents both opportunities and risks. The company’s AI-driven growth prospects and improvements in compliance could provide long-term gains, especially as the AI server market continues to expand. However, the company’s recent struggles—delayed results, disappointing guidance, legal scrutiny, and increasing competition—highlight the risks involved.
For investors willing to tolerate risk and looking for exposure to the booming AI sector, SMCI stock may still offer upside potential. However, those who are more risk-averse may want to consider holding off until there is more clarity on the company’s regulatory issues and financial stability.
Featured Image: Freepik
Author Stephanie Bédard-Châteauneuf 
