While Super Micro Computer Inc’s SMCI stock has gained 38% year-to-date, “making it the best performing stock in our Hardware coverage,” there are downside risks on valuation, competition and gross margins, according to Goldman Sachs.
The Super Micro Computer Analyst: Analyst Michael Ng downgraded the rating for Super Micro Computer from Neutral to Sell, while reducing the price target from $40 to $32.
The Super Micro Computer Thesis: Recognizing the large market opportunity in AI servers, competitors have made significant R&D investments, which could pressure the company’s market share leadership in the segment, Ng said in the downgrade note.
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“Super Micro Computer’s gross margins are likely to contract in 2025 through 2027 due to intensifying competition and the AI compute transition from Hopper to Blackwell,” the analyst stated.
“The company not only has high levels of customer concentration but also high supplier concentration, which “puts it into a price-taking position,” he added.
Super Micro Computer’s stock still trades at a premium to its server OEM peers, which is likely to converge due to the “lack of differentiation in AI server product” and risks associated with high customer and supplier concentration.
SMCI Price Action: At the time of publication on Monday, shares of Super Micro Computer had declined by 1.83% to $41.38.
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