Super Micro’s Stock Plummets 20% Despite AI Success

Super Micro Computer’s stock plummeted by 20% on Friday after an analyst cast doubt on the red-hot U.S. company, but its shares, considered one of the best pure plays in artificial intelligence (AI), are still up an astonishing 181% year-to-date.

Despite the steep drop, Super Micro’s stock, which makes high-power data servers crucial for generative AI and counts Nvidia and Intel among its major customers, remains significantly high at just above $800. This marks its sixth-largest daily percentage loss in 17 years and its worst day since August 2023.

The decline followed a report from Wells Fargo analyst Aaron Rakers, who initiated coverage of Super Micro with a neutral rating, suggesting that the stock’s recent surge already reflects its exceptional earnings potential.

Despite this setback, Super Micro is not without its supporters. Wells Fargo’s $960 price target still indicates a nearly 20% upside from Friday’s closing price, reflecting growing institutional backing for the once-overlooked Silicon Valley firm. Bank of America had just initiated coverage on Thursday with an even higher target of $1,040.

Bank of America estimates that Super Micro currently holds a 10% market share in AI servers, a figure expected to expand to 17% within three years as the AI server market grows by approximately 150%, further justifying Super Micro’s lofty valuation.

Analyst Hans Mosesmann from Rosenblatt has even dubbed Super Micro “the Switzerland of AI,” highlighting the company’s ability to thrive regardless of which AI technology emerges as dominant, much like Switzerland’s neutral stance in conflicts.

While Friday’s selloff wiped out over $10 billion in market value for Super Micro, the company’s market capitalization still stands over $40 billion higher than at the end of 2022, when it was just $4 billion.

In a related development, Arm Holdings, a British semiconductor chip designer that has also enjoyed a rally due to AI optimism, saw its shares drop 5% on Friday. Arm’s stock has surged over 80% this year, pushing its valuation above $100 billion, outpacing even S&P 500 leader Nvidia, which has gained roughly 50% in the same period.